This is your TSP Watchdog UPDATE for the week ended March 13, 2020.

Wow!  Wow!  Wow!

Stocks were all over the place this week – with all three indexes losing big for the week.  The S&P 500 lost 8.79%.  The Dow dropped 10.36%.  The NASDAQ fell 8.17%.

Volatility was unprecedented.  The smallest move in either direction for the Dow was the 1,167 point gain on Tue.  At the end, only a sharp rally late Fri afternoon avoided 10%+ losses on all the indexes.

It is worth noting that the late rally on Fri was due more to internal machinations than any fundamentals – as short covering before the weekend precipitated a short squeeze and created a “melt up”.  People may point to talks about federal bailouts as the impetus for Fri afternoon’s surge, but it was almost purely a technical move.

Cutting right to chase – everything is all about the coronavirus for the next few weeks.  One analyst I read this afternoon commented that the CDC is now more important than the Federal Reserve.  He’s probably right – for the foreseeable future.  Until life begins to return to normal, the economy will be in the tank, and guidance from the CDC will be critical in determining when life gets back on track.

In our TSP Watchdog database, we are 100% in cash (G Fund) and have no trend changes to report.

We are very happy to say we recommended moving to cash two weeks ago – after the first week of major volatility.  We received a few emails from people who wanted to quibble about the fact we did not recommend moving to the G Fund on the absolute best day of that week, but I think everyone who took our advice is happy they did.

I hope you are all in the G Fund, and at least that part of your life does not need to be a worry during this crazy time.

If you have not gotten out, it probably is not too late to do so.  There is no telling exactly where the market will stop falling, but it certainly shows no signs of a major bottom yet.  So, selling on rallies is likely still better than just sticking it out.

And, you can rely on us to let you know when the trends change back to positive so you can get back in to participate in the eventual recovery.

I wish I could say I am brilliant for recommending 100% cash two weeks ago – but all I did was follow the signals we track.  I didn’t even create the signals.  They have been used on Wall Street for over 50 years.  I just brought them to analyzing the TSP funds.

There is always a sense of trepidation when we issue a recommendation – either to BUY or to SELL.  Could this signal be coming right before things turn around – leaving us on the wrong side of the turn?  But we have seen this discipline work many times in both our back-testing analysis and in real time – so we follow the signals it gives us.

As our analysis (back-testing) of the 2007-2009 financial crisis suggested, and the bursting of the dot.com bubble in 2000-2002 before that, the process we use can be effective in avoiding major market declines.  We’ve seen it in smaller downturns in real time since beginning to publish in 2013, and now we are seeing it during a period of unprecedented volatility.

Stay with us to know when the trends turn positive again.  Getting out and avoiding a downturn is worthless is you don’t get back in to participate in the eventual recovery.

As always, please reply to this email with questions.

Scot B.

P.S.  It looks like we are all in for an unusual ride in the weeks to come – both in the markets and in our lives.  I wish you all a sense of peace as you navigate these uncharted times.