Thrift Savings Plan Talk

The holiday is over. Here come the summer doldrums.

With the Independence Day holiday behind us, history tells us we are likely to start seeing lower volume and mediocre results. The early part of July tends to be the strongest and the middle of the month the least attractive. I don't know if the pullback is over, or if it's just beginning, but if we put all the indicators together, along with seasonality information, and I'll take a stab and say that the pullback will continue until later this month.

July Up days:	1, 2, 3, 5, 9, 11, 14, 16, 17, 25, 26, 29, 30, 31
Down days:	13, 18, 19, 20, 21, 22, 23
Most positive:	1, 3, 9, 14, 30, 31
Most negative:	18, 19, 22, 23

Data provided courtesy of www.sentimentrader.com

I showed a chart of the Dow Transportation index just after it started its pullback. I suggested that the S&P 500 may follow and shortly thereafter, it did. That is typical action. Since then the Dow Transports consolidated for a few days, then had another big drop. This is very similar to what I have been saying the S&P 500 may do (drop again) comparing it to the 1994 S&P 500 chart. Notice below that the Transports fell to just above the prior low made in May, similar to what the 1994 S&P 500 did. Will the 2005 S&P 500 chart follow? Are you confused yet? Here's the charts. Maybe they will explain better in pictures, what I am attempting to convey in jumbled words.

Here are the charts in this order;
1994 S&P 500, 2005 Dow Transports, Current S&P 500.

                                     Charts provided courtesy of www.decisionpoint.com

Mutual funds managers have very little in cash. That is, their cash levels are at 4.1% of their total holdings. In the last 20 years there was only one month with lower cash levels, March of 2000. The significance of that date is that it was the month of the market peak before the big bear market. Ouch! But don't worry. Things aren't near as bad now as they were then.

Interest rates are low now and that might explain why they have little cash, but T-bill rates have been steadily climbing for over a year now and we should have seen cash levels rise. Instead they are falling and we are getting close to historically low levels of cash, which could spell trouble.


                 Chart provided courtesy of www.sentimentrader.com

Here's the results of this week's TSP Talk Sentiment Survey:

Bullish (up) 42%
Bearish (down) 29%

Much more bullish than last week.

That's all for today. Currently 100% G fund. Hope everyone had a pleasant holiday weekend...