Fast Start, Slow Finish
After starting the new year with a big positive
week, the stock market fizzled the rest of the month leaving investors
with stiff losses, and while it wasn't as bad as January 2009, starting
the year in the red has many TSP participants concerned for 2010.
For the week, the C-fund was down 1.62%, the S-fund
lost 1.98% and, with the dollar rallying last week, the I-fund dropped
2.87%. The G and F funds each gained less than 0.10%.
For January, the losses in the stock funds were
fairly steep. The C-fund was down 3.60%, the S-fund -2.43%, and the
I-fund a still 5.17%.
Last week we mentioned that things were starting to
deteriorate technically but that we wanted to wait 3 to 5 days to see
if the losses were knee-jerk reactions to news events. The fact that
the market did not rebound is bad sign, and while we have not seen our
bear market indicators flash yet, we could be starting sort of a
correction phase (defined as a loss of 10% or more) .
I won't put a bear market label on the S&P 500
until the 50-day EMA moves below the 200-day EMA, but that doesn't mean
we won't see a significant correction. At the same time, while we are
seeing some technical breakdowns, we have not seen a complete breakdown
(lower lows) in the trend. This thing could rebound quickly.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The question now is, will a rebound give us an opportunity to be
sellers in what could turn out to be a correction, or is this just
another pullback in a bull market that needs to be bought for a longer
period?
I don't have the answer for you, but a lot of that answer will depend
on the individual investor. What kind of tolerance do you have for
risk? Do you want to buy in a risky situation? Do you want to sell in
case things get worse?
When you need your TSP money may help you make that decision. Anyone
closing in on retirement years may not want to take as many chances as
a younger investor.
Just try to be prepared with a plan, for whichever way this breaks. If
all support breaks, we may be in for a prolonged down trend. How will
you react? If we rebound before support breaks, will you take profits
or continue to buy? Having a plan in place beforehand makes it easier
to act rather than waiting for a highly emotional spike higher, or
breakdown that will likely develop.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
Tom Crowley
www.tsptalk.com