Thrift Savings Plan

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TTT--26 Apr 06: Sentiment Up While Momentum Down: Not a Good Mix

All TSP funds finished lower today. The U.S. Dollar hit another new seven-month low, its lowest price since 12 Sep 05, thereby confirming its downtrend. Despite counter-trend corrections, which are normal within any trend, the long-term secular trends of both commodity prices and foreign currencies still point higher. This will mean rising inflationary pressures in months ahead and a sustained predisposition for the I Fund to outperform other TSP choices--especially long-term investments into the F Fund.

The Bullish majority of investors are vulnerable to a shakeout. Rising commodity price inflation, foreign currencies, and interest rates could provide justification for a downside surprise. Much of the optimism appears to ride on strong corporate earnings. But should earnings stumble, the Bears could easily gain the upper hand. On Tuesday, stock prices opened higher but quickly fell into the red and stayed there. Breadth was weak for the second consecutive session and has been in a weakening relative trend for nearly three weeks. New York Stock Exchange Volume rose to 2.37 billion shares from 2.16 billion shares, indicating a growing urgency to sell stocks immediately, even into price weakness.

Stock market sentiment has been overly Bullish for many months, which is ultimately Bearish. According to the Art of Contrary Opinion, after the great majority has been converted to the Bullish side, there are not enough new buyers left to push prices higher, and then normal selling weighs down prices. It's not a matter of "if" the correction will happen--it's only a matter of "when."


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Current Action Limits & Allocation Percentages for 26 Apr 06:
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F Fund (Long-term Treasury Bond Index) If TLT < $83.21, move all funds into G Fund.
Close on 25 Apr was $84.13. Rate of change from previous close was -1.19%.
Current F Fund allocation is 10%.

C Fund (S&P 500 Index) No buy possible.
Close on 25 Apr was $130.37. Rate of change from previous close was -.41%.
Current C Fund allocation is nil.

I Fund (EAFE Index) No buy possible.
Close on 25 Apr was $67.48. Rate of change from previous close was -.06%.
Current I Fund allocation is nil.

S Fund (Wilshire 4500 Index) No buy possible.
Close on 25 Apr was $597.66. Rate of change from previous close was -.27%.
Current S Fund allocation is nil.

G Fund (Money Market)
Current G Fund allocation is 90%.

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