Good evening, TSPwire Tactical Investor!

We had another brutal week on Wall Street. The recent turmoil in credit markets has put some mortgage lenders out of business, forced the shutdown of some hedge funds and virtually frozen the leveraged-buyout activity that was helping propel stock in first half of the year. Now the fear is that the pain could spread more broadly into the economy by crimping corporate and consumer borrowing.

US Financial Sector led the sell-off on Friday (shed 3.9%). S&P 500 (C Fund) with heavy component of financial stocks, tumbled 2.7%. The S&P 500 is down 7.7% from its record set last month, which means it has covered most of the ground to a 10% pullback traditionally defined as a correction that shakes speculative excess out of a bull market.

We also observed another interesting dynamics this week. On Tuesday and Wednesday stocks stayed fairly flat during the day and then surged up in the last 30 minutes of trading. The only explanation that makes sense is that speculative day traders were covering their short-sell orders at the end of the day. It looks like a lot of people were betting on market going down since Wednesday and eventually it dipped down on Friday.

This week our models yielded following results: F Fund got the best score and ended up with BUY signal, I Fund came second with HOLD, C & S Fund got worst scores and finished up with SELL signal. Again this week we decided to go against our models because we strongly believe that stocks are getting very close to the bottom of market correction and we can not afford to miss the recovery. We will keep at: 50% in I Fund, 30% in C Fund and 20% in S Fund.