Thrift Savings Plan Talk

Anticipate or react?

Things are so much better than they used to be for TSP participants. Remember the days, not so long ago, when we had to wait 2 to 6 weeks before an interfund transfer took effect? Timing the market was possible, but it could be very frustrating at times.

Now we can move our money daily but we still can't make the transfers any time we'd like. For instance, if there was a major news event at 1 PM ET that would obviously have a negative impact on the stock market, any interfund transfer you make at that moment would not take effect for a day and a half. There could be a lot of damage done in that time.

For that reason I have been less reactionary and more anticipatory when making changes. In other word when my indicators send a yellow or red flag, I put my account into a more cautious position. Being anticipatory can cost you as it did me this summer, but waiting for the market to make a move before reacting can be costly as well. The S fund has now given back four weeks worth of gains in just 3 days. It wasn't a terrible situation for the bulls this time because of how strong the S fund has been over the last several weeks, but you can see that there would be times when the risk may not be worth it.

We had a similar situation in January of this year. The indicators were waving the yellow flag in late December but rather than just getting out of stocks immediately, I decided to stay in for the seasonally strong last week of December / first week of January. Of course the humbling market fell off the table in the first few trading days in January this year and I had some big losses that could have been avoided. You never stop learning. You battle the market and you battle yourself.

For the first time in quite some time two of the three legs of the bull market are now in bearish territory. Psychology and monetary conditions are both on the bearish side of the the neutral line with monetary conditions recently crossing over. We lost the psychology many months ago and now rising interest rates, the low money supply, and the weak bond market are the cause for the new bearish monetary reading. Only valuation is still firmly in bullish territory and that could act as a cushion to keep from any major damage being done to stocks. But still with 2 of 3 gone, we have to remain cautious.

So is oil to blame or just the excuse? Is it over extended or making a new leg higher?

                       Chart provided courtesy of www.decisionpoint.com

We have the Fed decision on interest rates this afternoon. Will they stop the bleeding or pour salt in the wounds? It is almost a foregone conclusion that they will raise rates another quarter point, but what they have to say about future hikes is of major importance. This is another one of those cases where the announcement will come after the TSP deadline and you will be stuck in your current allocation for a day and a half no matter what happens.

That's all for today. Currently 100% G fund. Thanks for reading.