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The stock market closed out a rough week strongly as the 100-point gain in the Dow on Friday recouped almost half of the week's earlier losses. On the week the Dow still lost 117-points and we now have some interesting technical setups forming. Here are the TSP fund returns for the week of August 6 through August 10. The S&P 500 broke below the rising wedge pattern (red) last week, as we would expect a rising wedge to do, and the rally on Friday took the index back up to the bottom of that wedge, which could now act as resistance. The 20-day EMA gave the index some support so the test coming into next week will be, which will give - the wedge resistance or the support of the EMA? The resistance of the wedge is rising so there is room on the upside, but a break below a rising wedge is a bearish indication. Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The weekly chart below will give us a longer-term view of the S&P 500. You can see that there is long-term resistance line just above, and the current double top is a formation that tends to trigger some selling before a breakout. You can see some previous double tops on the chart (blue lines) did produce at least pauses in the rally. Remember, each line represents one week's worth of action on this chart. Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The pattern above actually looks pretty good for the longer-term as that large cup & handle formation tends to break above that long-term resistance - eventually. But over the next couple of weeks the index has to deal with the short-term double tops that may cause it some problems. The dollar had fallen sharply and the UUP (dollar ETF) actually fell below the 200-day EMA last week, but it quickly reversed on Friday and it closed back above it. This chart looks to be getting more long-term bearish (for the dollar), but for the short-term we have seen 2 consecutive positive reversal days and there is a large open gap above that will try hard to get filled this coming week. Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Since the trend over the last few years has been for the dollar to move in the opposite direction of stocks, this set up confirms what looks like a possible realistic scenario. That is, a short term rally in the dollar and more short-term weakness for stocks. As I said the cup and handle formation on the S&P looks promising, but during this election year, which normally has a bullish bias, the market will likely react to the changes in the very close presidential election polls over the next couple of months. We'd hope the charts are telling us the story, but it in this case the news may be driving the charts. We'll see. Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up. Tom Crowley www.tsptalk.com The legal stuff: This information is for educational purposes only! This is not advice or are commendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
Tom Allen, TSPFundTracker.com September 3, 2012 10:49 AM
The time has come to move out of federal employees’ TSP stock funds, says investment analyst If your investment strategy includes timing the stock market, now is a good time to shift your holdings out of the TSP Funds that are composed of corporate stocks, says one market watcher. “Given the more than 7% run-up in the overall stock market that occurred between early June 2012 and September 1, 2012, now is a good time to take profits”, says Tom Allen, editor of TSPFundTracker.com. “For TSP Fund investors, we currently recommend shifting investments from the C, S, and I stock funds into the G bond fund”, he says. More than 3 million federal employees invest in the TSP (Thrift Savings Plan) Funds. Allen explains that the G Fund currently is preferred over the other TSP bond fund, the F Fund, as a place for temporarily parking money because interest rates are not expected to rise in the foreseeable future. The G Fund provides a higher interest yield rate than the F Fund, but the G Fund can lose significant value during a rise in interest rates. The F Fund does not lose significant value during an interest rate rise, but its interest yield rate currently is lower than G Fund. The reasoning behind Allen’s current recommendation to shift out of the C, S, and I stock funds lies in his risk-to-reward evaluation. “There is ample historical evidence that a stock market rally in the last six months of a presidential election year often is followed by a large stock market downturn. Given the current weakness of the economy, we believe the risk of missing a large stock market rise in late 2012 is much less than the risk of getting caught in a large stock market downturn during that time or early in 2013. Our thinking is that a savvy investor could take their profits now and get an almost no-risk yield of about 3% in the G Fund for several months, and then shift back into the C, S, or I funds after a large stock market drop that begins in late 2012 or in 2013.” “Whether or not to shift money between funds definitely is a big investment decision. Many investors probably are uncomfortable trying to time the stock market by switching all of their holdings out of the C, S, and I funds. An investor could take a less aggressive approach to market timing and hedge their bets by shifting only a portion of their holdings from those funds to the G fund”, Allen says. Allen adds the following caveats to his recommendations, “Although we have had considerable success in our more than 20 years of TSP Fund investing, we cannot predict stock market performance, and an investor has sole responsibility for their investment decisions.” The daily-updated graphs of the TSP Funds can be viewed at TSPFundTracker.com.
The time has come to move out of federal employees’ TSP stock funds,
says investment analyst
If your investment strategy includes timing the stock market, now is a good time to shift your holdings out of the TSP Funds that are composed of corporate stocks, says one market watcher. “Given the more than 7% run-up in the overall stock market that occurred between early June 2012 and September 1, 2012, now is a good time to take profits”, says Tom Allen, editor of TSPFundTracker.com. “For TSP Fund investors, we currently recommend shifting investments from the C, S, and I stock funds into the G bond fund”, he says. More than 3 million federal employees invest in the TSP (Thrift Savings Plan) Funds.
Allen explains that the G Fund currently is preferred over the other TSP bond fund, the F Fund, as a place for temporarily parking money because interest rates are not expected to rise in the foreseeable future. The G Fund provides a higher interest yield rate than the F Fund, but the G Fund can lose significant value during a rise in interest rates. The F Fund does not lose significant value during an interest rate rise, but its interest yield rate currently is lower than G Fund.
The reasoning behind Allen’s current recommendation to shift out of the C, S, and I stock funds lies in his risk-to-reward evaluation. “There is ample historical evidence that a stock market rally in the last six months of a presidential election year often is followed by a large stock market downturn. Given the current weakness of the economy, we believe the risk of missing a large stock market rise in late 2012 is much less than the risk of getting caught in a large stock market downturn during that time or early in 2013. Our thinking is that a savvy investor could take their profits now and get an almost no-risk yield of about 3% in the G Fund for several months, and then shift back into the C, S, or I funds after a large stock market drop that begins in late 2012 or in 2013.”
“Whether or not to shift money between funds definitely is a big investment decision. Many investors probably are uncomfortable trying to time the stock market by switching all of their holdings out of the C, S, and I funds. An investor could take a less aggressive approach to market timing and hedge their bets by shifting only a portion of their holdings from those funds to the G fund”, Allen says.
Allen adds the following caveats to his recommendations, “Although we have had considerable success in our more than 20 years of TSP Fund investing, we cannot predict stock market performance, and an investor has sole responsibility for their investment decisions.” The daily-updated graphs of the TSP Funds can be viewed at TSPFundTracker.com.
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