TSP Talk - Thrift Savings Plan Strategies

Market Comments

April 28 2010

Current TSP Share Prices

Today's Commentary (Short Term Outlook)

Greece slips back into the spotlight

The market was hit hard yesterday, and while the Goldman Sachs hearing was the front page headline, it was Greece and Portugal that were the culprits yesterday. The Dow lost 213-points, but the other indices actually did worse.

Greece continues to be a thorn in the side for U.S. stocks, and although these setbacks have been temporary and decent buying opportunities in the past, today's news affected Portugal as well, which is new development. Standard & Poor's cut Greece's debt rating to "junk," and cut Portugal's rating two notches. The move on Portugal spooked investors as it looks like Greece's problems are starting to spread.

The TSP stock funds were hit hard as the C-fund lost 2.34%, the S-fund dropped 2.50%, and with stocks down and the dollar up, the I-fund plunged 3.49% putting it in negative territory for 2010. The F-fund gained 0.43% as bond yields dropped again.

The S&P 500 fell through the 20-day EMA for the first time since February. The 50-day EMA is looming and it would surprise me if the S&P did not hold at that level on the first test - should it be tested. There is still a lot of support between 1150 and 1168. A 5% correction from the top would be a move to about 1168, and the 50-day EMA is just above 1167 and rising.


                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

We did get that buy signal from the ARMS index, which we talked about yesterday.

                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
At some point this market is going to correct more severely, but as I have been saying, we have not seen any technical evidence to back that up this time around.

That said, I am very nervous about the fundamentals of this market, what with what is happening in Greece and Portugal, plus our own deficit problems, so that technical picture could change if the S&P drops below the 50-day EMA and we start seeing trendlines break. But until then, we may be nearing the opportunity some of us have been waiting for - a 5% to 10% pullback.

I wanted to show that the yield on the 10-year T-note has now filled the gaps and reached our initial target of 3.68%. We could see continued declines in yields (rally in bonds and F-fund) as the 200-day EMA could be the next target. Or, we could see yields reverse back up here.


                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

I suspect that stocks will play a big part in that direction. If stocks can rally here, I would expect bond yields to move up again. If stocks continue to fall, look for that 200-day EMA to be hit. The F-fund will do the opposite of what yields do.

I admit that the relentless upward action in the market has gotten me a little lazy on research and today's FOMC meeting has snuck up on me. The Fed's action today could be a market mover, but which way, I don't know. No one really expects a rate hike, but with the market moving along swimmingly, and the economy showing signs of a recovery, the Fed will have raise rates at some point. Low rates are generally good for stocks but investors could be spooked if the Fed sees no reason to at least consider raising rates. It could mean they don't see a recovery yet.

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

Tom Crowley

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