TSP Talk Blog

It was quite a battle in the stock market yesterday between the bulls and bears as we saw several swings back a forth from gains to losses, and we're not talking minor dips and rallies. The Dow traded in a 700-point range, closing up 557-points, while the Nasdaq (and large tech Nasdaq 100 Index) were all over the place from deep early losses of 2%, to closing at the highs of the day with a near 1% gain. So volatility is here, but the bulls were able to fight off the ferocious bears yesterday.

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After the bell Moderna was back in the news as they have reported "robust" results from their coronavirus vaccine trials.

In a statement from Moderna’s chief medical officer, “These Phase 1 data demonstrate that vaccination with mRNA-1273 elicits a robust immune response across all dose levels and clearly support the choice of 100 ug in a prime and boost regimen as the optimal dose for the Phase 3 study.... We look forward to beginning our Phase 3 study of mRNA-1273 this month to demonstrate our vaccine’s ability to significantly reduce the risk of COVID-19 disease.”

Their stock, and the index futures markets were up in after hours trading on the news, so barring any overnight changes, we're looking at another positive open - and possibly a big gap.

The action we've seen over the last two days has certainly been memorable as what would normally have taken a week or more to develop, seemed to happened within about 24 hours. That is, we saw a breakout from bull flags (typical), and test of the prior highs (normal), a double top pullback (check), another morning of follow-up selling (naturally), followed by a positive reversal day (again?). That's a good week or two under normal conditions, but we're in an election year with a pandemic still around us and a lot of emotional traders and investors watching, acting, and reacting.

As I mentioned yesterday, this kind of action makes it very difficult for us TSP folks since we're playing the "end of day" closing price, yet we have to make our decision at least 4 hours before the close.

You would think in a day where transactions are nearly instant, and trading commissions are a thing of the past, that the TSP would be moving closer to allowing us to be more active. Their argument would be that retirement accounts are not meant for trading, and there was a time where that was more true, but we're in 2020 and the world has changed. Unfortunately they don't have the same incentive to change things that we have.

I apologize for dwelling on this but I know some of you feel the same way. The chart below is a little confusing, but here's how a fast moving market and a slow transaction process can really hurt.

Back on June 15 I sent out alerts to our Plus subscribers when the market opened that I was buying 100% into the S-fund. The DWCPF (S-fund index) opened near 1330. By the close, and when I got filled, it was already near 1400. A dramatic intraday reversal, and anyone who made an IFT got the raw end of the deal getting filled near that 1400 closing price.



Fast forward to this past Monday and the market opened higher. I sent alerts out before the opening bell because I wanted to lock in some gains and sell some of that S-fund position, and the DWCPF opened near 1460. Fast forward 6.5 hours and I got filled at the close near 1415. Another dramatic intraday reversal goes against us, and another raw deal.

The dark green arrow in the chart shows the gain we could have had if we had quick fills. The red arrow shows our actual gain in that trade. I'm not saying we should get instant fills, although it would be nice, but in a perfect world we would have made close to 10% on that trade, and the difference between a 10% gain (buy @ 1330, sell @ 1460) and the actual 1.1% gain we got (buy @ 1400, sell @ 1415) makes a BIG difference in anybody's account.

I'm sure there are times when it works in our favor, but in those cases I'm sure I just thought I was a genius, rather than lucky.

But I digress. We have to play within the rules and figure out how to do that most effectively. And since we can really only buy once, and sell once in our account each month because of our two IFTs, the challenge is on us.

Right now we have an economy that is handcuffed for the most part and a cure or vaccine would certainly change everything. When one is announced definitely, the market is likely going to soar. Knowing we have that delay built into our account transactions, we're almost forced to keep some money in "the game"... just in case, no matter what the current market and economic conditions are.

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Based on the positive move in the futures overnight, let's make this brief because the charts are changing as I speak.

The S&P 500 (C-fund) was down sharply early yesterday, but it looks like the 20-day EMA played a major role in giving it some support on its 24 hour pullback after testing the June highs on Monday morning. Other than that double top resistance, the chart still looks good. The June high was 3233 and Monday's high hit 3235. That's where the battle to get to February's highs will start.




The Dow Transportation Index finally closed back above the 200-day EMA and that little triple peak is actually a bullish cup and handle formation that looks ready to break out.




The EFA (I-fund) rallied and the dollar was down some and it looks like this one is ready to challenge the June highs as well.




The High Yield Corporate Bond had a failed breakout on Monday, from its big bull flag, but yesterday it bounced back to reestablish that breakout.




The VIX lost over 8% on the day but it is still above the 200-day EMA and still very close to 30, and that tells us that investors expect the wild swings to continue.




The BND (bond ETF) has remained relentless and continues to ride up that trading channel while yields, for whatever reason, continue to slip. Perhaps the elevated VIX has enough investors worried about volatility in stocks, that bonds, despite seemingly overbought, allow them to get more sleep.




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

Tom Crowley



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