Next Week's TSP Funds Allocation:

Good morning, TSPwire Tactical Investor!

We are very pleased with results that our financial models yielded last week. We managed to pull out all funds from stocks right before Tuesday's sell-off and saved ourselves from the 1.3-1.4% loss (C & I Funds dropped 1.3% last week and S Fund lost 1.4%).

We ran our financial models and calculated new scores for TSP Funds. It looks like situation on the market didn't change much since last week. I, S and C Funds triggered SELL signals all over again. Distribution of results for stocks was identical to the one that we had a week ago - C Fund got the worst and I Fund got the highest but still negative scores.

We do have have some good news - outlook for F Fund improved greatly. Last week F Fund triggered HOLD signal (our models returned equal number of SELL & BUY signals). This week F Fund finished up with a strong BUY signal.

Based on results for the next week we decided to keep 100% of our funds in F Fund.

Recent News v.s. Our Take:

China confirmed plans to create an investment company to get better returns on its foreign currency reserves that are worth $1 trillion.

Our take: until now China’s currency reserves were mainly invested in US Treasury bonds. Even though China’s premier insisted that this new move will not have negative impact on the US dollar we don’t see how that can be possible. USA largely depends on Treasury bonds to finance our national budget deficit. If China will decide to “diversify” their investments (even partially) that will result in a huge turbulence on bonds and stocks markets.

Consumer Price Index (CPI) rose but came in line with average forecasts on Wall Street. Wholesale prices shot way above analysts’ expectations. 

Our take: if those results are correct that can only mean that retailers lowered their profit margins. This trend can negatively impact earnings and prices of stocks in retail sector.