With yesterday's action, all my models have signaled "buy" on the long side.
There is one crack in the ice though:
One indicator that I watch is indicating a possible short-covering rally, meaning that people were lulled into the "bear trap" last week, effectively shorting stocks. Now that the market has taken off, they are experiencing a great deal of pain and are having to "cover" their short positions. This inflow of money is significant, as it drives demand up and with a constant supply, and it means that they are buying at higher prices. When the shorts have covered (and it appears we are in day-three of this three-to-five day sequence), the bulls must step in and continue the run higher or we'll pull back again. Given that this is options expiration week (OPX), rising volatility is expected and the chance of dropping is increased.
Given this situation, I am giving two scenarios:
1) Aggressive.
If your time horizon is longer you can afford to take more risk. Your allocations are:
F-Fund: 8%
C-Fund: 38%
I-Fund: 28%
S-Fund: 26%
2) Conservative.
If your time horizons are shorter (~5-10 years), you should take less risk. This is the model I follow for my wife's portfolio, which is up 3.65% over the past rolling 12 months:
F-Fund: 3%
C-Fund: 15%
I-Fund: 11%
S-Fund: 11%
G-Fund: 60%
I have made the changes to my wife's TSP account effective at the close of markets today.
Adjust the numbers to whatever level you are comfortable with, but I would keep the ratios. Remember, you are responsible for your own decisions, and I am not. Please take ownership for your actions.
Regards,
pgd
