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TSP Talk: Morning rally turns sour

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Stocks opened higher on Thursday after the PPI report was released, but sellers stepped up later in the morning to flip the recent relief rally on its head. The Dow lost 177-points, which was only 0.49%, but the broader indices were clobbered. Tech stocks in the Nasdaq and growth stocks in the small caps were all hit hard. Bonds were down but closed off their lows, as yields eased slightly.

Daily TSP Funds Return
The PPI report wasn't too bad, and actually a little better than expected and well below last month's reading, meaning it wasn't quite as inflationary as last month - not as much as Wednesday's CPI showed. But for some reason the stock market didn't like it, or at least people wanted to sell the rally the started the day. The Fed reiterating "several rate hikes this year", certainly didn't help.

I don't hear a lot of complaining about it (except from myself), but the delay in processing our TSP trades has burned me time and time again. Not some of the time, or a lot of the time, but rather it seems like basically every time that I decide to make a transfer (IFT) in the morning before the deadline (and I have to make my decision well before the deadline so I have time to send email and text alerts and update the website with the information) the market spends the rest of the day going in the direction such that I get the worst sell buy or price possible.

While the world has advanced toward free and instantaneous trading, those if us in the TSP get left behind by the minimum 4 hour delay in processing the transactions and yesterday, if you wanted to sell when stocks were rallying in the morning, you sat and watched those gains disappear and pile on a bunch of losses without being able to do anything about it.

When I left the government many years ago I left a portion of my money in the TSP and rolled over the rest into an IRA so I could do more active trading. Now I'm getting a little sick of getting screwed every time I make one of our two precious IFTs each month. The trade is made and my account sits for four hours and gets eaten alive. It actually makes me consider moving the rest of my TSP balance into my IRA. Would that be ironic if TSP Talk guy gets out of the TSP?

There are a lot of good things about the TSP, but now that we have free trades in IRAs and no deadlines, I'm not sure if there are many advantages anymore. We have limited choices to invest in, although they are planning some new mutual style funds later this year from what I understand, but I assume it will be the same old two moves a month and 4 to 28 hour delays to execute the trade. The 28 hours would come into play if you made an IFT a minute after 12 noon ET, in which case your trade isn't made at the close that same day but rather at the close of the following business day.

Maybe others are complaining as well, but I don't really hear it. We all just accept that we have a big disadvantage. I know some people argue that we shouldn't be trading our retirement accounts. I say, why not? This isn't 1980 anymore. Will they start telling us what we can and can't do with our salaries next? It's our money and anyone with a cell phone has the technology in their pocket to trade instantly.

Sorry. Nobody likes a whiner, but I do feel better now -- a little.

On Wednesday afternoon we started to see a bit of wobbling in the rally, and of course we can't do anything in the afternoon, so I was planning to sell any morning strength in stocks on Thursday as it looked like the relief rally was running out of steam. It didn't take long however, before the Wednesday wobble and Thursday morning rally turned into all out sell off.

We now have some broken charts and potential lower highs on many of them. The breakdown below that horizontal red line on the S&P 500 is a breach of what we had hoped would be support, after it climbed back above 4715. Now it's below 4660, and slightly below the 50-day EMA, so without another bounce higher, or at least a hold at the lower rising support line for a 4th time, this chart is threatening to possibly head toward the 200-day average, which is now at 4393.

The dollar was down sharply to start the day but it bounced back to close closer to flat on the day. Still, this chart is broken, and other than possibly rebounding to fill that gap near 25.60, this chart is now in a downtrend.

The market is trying to adjust to the new hawkish stance that the Federal Reserve is now taking to curb inflation, and it has been a long time since it has had to deal with it. We may not go into bear market mode, but stock valuations have to be adjusted for the changes coming. I heard yesterday that each 1% change in rates can impact valuations by 10% to 20%, and the Fed is now talking at least four 0.25% increases in 2022.

Holiday Closing: From "Some financial markets will be closed on Monday, January 17 in observance of the Martin Luther King, Jr. Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (January 17) will be processed Tuesday night (January 18), at Tuesday's closing share prices."

The S&P 500 / C-fund is down testing its 50-day EMA again (purple line.) This is the 4th test in the last six weeks and that's not a good sign. "V" bottoms were fairly common in 2021. Double bottom "W"s are also fairly reliable. A 3rd test is questionable. I think the chances that a 4th test holds is getting slim. The same goes for the bottom of that blue rising channel. A 4th test would make me nervous.

The DWCPF (small caps / S-fund) turned a morning gain into another ugly day. It actually closed at its lowest point since May, if you can believe that - especially with the S&P 500 making new highs just 8 days ago. All 5 of the moving averages that I have been watching have now been penetrated, and what we have left looks like a head and shoulders pattern in a downtrend, which is not good.

The EFA (I-fund) is still hovering near recent highs but yesterday's action created a negative outside reversal candlestick. Whether that was just needed to fill that blue gap or if this is another peak, remains to be seen. If U.S. stocks falter, this one will likely drop as well, but the dollar may determine if the the I-fund outperforms the C and S funds regardless of the direction - and the dollar is now in a new downtrend.

BND (Bonds / F-fund) was up yesterday but continues to flounder below the old support line, which is now acting as resistance. If stocks start falling again, we could see a rally in bonds as a flight to safety, and that open gap would be a possible target. But if stocks rebound, the selling of bonds would likely continue.

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Thanks for reading. Have a great holiday weekend!

Tom Crowley

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  1. radarvector's Avatar
    You are exactly right! I don't see this as whining, you're just stating facts. I got burned in 2008 when I placed a trade one morning while the Dow was down over 1000 points. When the day ended it had recovered 75 percent of those losses costing me a huge potential gain. 750 Dow points may not seem like much now but back in 2008 it was very large percentage of the index. When I retired I vowed not to be constrained by the archaic TSP rules and I moved 2/3rds of my TSP into my self directed IRA at Vanguard. I have been very happy with that decision. I left the rest in TSP because the G fund was paying significantly higher than the money market accounts at Vanguard. In my opinion the G fund is the only reason to keep any funds in TSP after retirement and with it paying a measly 1% return, even that reasoning is sketchy.

S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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Yahoo Finance Realtime TSP Fund Tracking Index Quotes