TSP Talk Blog

The consistency of strong closes in the stock market over the last several weeks has been remarkable. No matter how much pressure the bears may try to put on during the day, we have seen buying into the close repeatedly. The Dow ended the day up another 119-points with gains at or near 0.50% across the board.

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Stocks have now rallied about 10% since the election and for those smart or lucky enough to have reaped the rewards, you may be asking yourself if it is time to ring the register yet.

Like in a casino, when you are ahead some folks would say you are now playing on "house money." When that's the case it is one option to put the pedal to the metal and let it ride as that's when big money can be made, and if you're wrong you'd only be giving back some of the gains you amassed. I'll show some charts below that may have you look at it a little differently.

I don't always look at it that way, but that is why I don't generally benefit fully from these straight up rallies. If I make money, I like to take at least some of the gains off the table. House money to me just means my money that used to belong to the house, so I have a hard time getting overly aggressive after big gains have been made. If you are young, that approach may work better than if you are nearing retirement.

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The SPY (S&P 500 / C-fund) gapped up yet again so I now count at least three open gaps on this SPY chart this month alone, which is quite unusual. Overextended but massive momentum. The bulls will be in charge until they are not, but you never know when that will end or what will trigger the end of the rally. Being up 9 out of the last 10 days based on potential changes sounds a little overzealous.




The DWCPF (S-fund) gapped up and moved up to new highs as well and it may be forming a small rising wedge pattern.




The EFA (I-fund) was up nicely despite strength in the dollar yesterday. The wedge pattern(s) is getting pretty stretched but again these patterns have not been breaking down like they normally do.




The dollar gapped up Monday morning following through on Friday's rally. The bottom of the old rising trading channel could act as resistance here.




The next few chart show some prior eye opening action in the markets. I remember the action in 1998 very well. I followed my TSP pretty closely back then but I wasn't very market savvy at the time and I hadn't come up with any strategies to approach the market back then.

We could only move our TSP money once per month back then, and we had to make the change by the 15th of the month to be effective on the 1st of the following month, if you can imagine that. Of course this was well before TSP Talk came about, but the experience certainly helped form my idea for the website several years later.

Anyway, it the middle of July and I was sitting in the G-fund missing out on the rally that summer waiting for an opportunity to buy at a lower price. As the 15th of July approached I remember reluctantly capitulating as I was getting tired of being left behind so I made an IFT to the C-fund (no S or I-funds at the time).



Here's what happened after that. Because of the delay, I was lucky to still be in the G-fund to end the month of July, which lost all of its early monthly gains, and a little more. Then came August and I took the full 14.47% loss in the C-fund that month.



(Nice little head and shoulders pattern breakdown on this chart.)


In 2007 stocks were chugging along rather nicely for several months with little volatility in the air. One day we woke up and China's Shanghai Index had plunged 8.5% overnight. The market opened the next morning and the Dow was down over 3%, which was actually off the morning lows.



The moral of the story.... You never know. Rallies come and they go. Stocks do tend to go up more often than go down, but they tend to go down faster than they go up.


The AGG (bonds / F-fund) opened lower but closed relatively flat on the day - holding above the 50-day EMA, which hasn't been much of a barrier lately.




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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley


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