Another wild week on Wall Street as a strong GDP (gross domestic product) report for the 3rd quarter helped spark a 200-point rally on Thursday, but a weaker than expected Consumer Sentiment report, some less than exciting earnings reports, and a threat of bankruptcy from a major financial group (CIT) and it adds up to a bad week for stocks and the first negative month for the S&P 500 since February.

For the week the TSP stock funds were hit hard.  The C-fund dropped 4.00%, the S-fund gave up 6.10%, and the I-fund slipped 4.91%.  Investors opted for bonds as the F-fund picked up .50%. 

                  

The poor week took all three stock funds into the red for October as the C-fund ended the month down 1.86%, the S-fund was down 5.51%, and the I-fund lost 2.41%.  The F-fund gained 0.51%. As we mentioned last week, we thought the market was due for a pullback, despite the strong seasonality we are about to embark on.  November through April has proven to be the most profitable 6-month period for stocks historically, with February being the only month during that period not averaging being up at least 60% of the time. 


                                  Chart provided courtesy of www.sentimentrader.com

But seasonality is not a major market indicator.  It should be treated more like a gentle breeze at the back of, or in the face of, the market - sort of like riding a bike.  That is, if the market is moving up, expect a strong seasonal bias to help push it along; making it easier to peddle, while weak seasonality might make stocks peddle a little harder to keep it moving.

The market, as judged by the S&P 500, remains in an uptrend but we have seen some cracks in the foundation that may prove troublesome.  If you are an investor who likes to manage your own TSP account, we are seeing another pullback that could turn out to be yet another buying opportunity.  But once the technical picture starts to deteriorate (the uptrend falters) you must be disciplined enough to move back to into defensive mode.  Volatility is dictating that we must stay nimble.

Taking risks is a good thing, if you are able to recognize when the opportunity is gone and a new development has begun.  That's what we talk about every day in our daily market commentary on TSP Talk.

Good luck, and thanks for reading.  We will be back here next week with another TSP Wrap Up.

Tom Crowley
www.tsptalk.com