Overall, we personally believe in diversification. An investor should always attempt to minimize risk, meaning never put all of your eggs in the same basket. We can not advise anyone how much capital they should trade. Everyone has their own financial objectives and risk tolerances. Everyone is responsible for their own final financial decisions. However, we will state our opinion as to what we are doing in our own account, our reasoning behind our decision, and the percentage breakdown between the various funds.

On our members page, we assess the current market condition using technical chart analysis. We also present our opinion by writing technical commentary for each of the funds.

Here's a specific example: The S&P is currently undergoing a little profit taking, but we do not expect the decline to be that significant. The negative divergence we mentioned in last week's newsletter is now taking effect as the stock declines. However, since the divergence was not an extreme amount, it is almost worked off since then. We are still sticking to our recognition of the all important Fibonacci 0.618 retracement level. We iterate what we stated two weeks ago: "We believe the S&P will tag a Fibonacci 0.618 retracement of the 2000 high to the 2002 low. That equates to a move to 1253.45 for the S&P 500 index (about $125.3 for SPY). We calculated this number by using the March 24, 2000 S&P high of 1553.11 and the October 10, 2002 S&P low of 768.67. The difference between these values is 784.44 points. Multiplying this value by 0.618 gives 484.78, and then adding this to the 2002 low of 768.67 equates to 1253.45." This value also plots out to be very close to where trendline resistance is shown on the chart (see blue trendline). Therefore, if the fund continues to approach this level, we will definitely be interested in switching to less risky funds, probably the F Fund (ticker: AGG) and G Fund. Our conclusion of last week is still valid: ... "For now, we foresee a short-term pullback to work off the small amount of bearish divergence, and then the index should increase toward the 0.618 Fib level."

There is no general answer that fits all conditions. The market is an ever changing beast. If the stock market is trending up, we may suggest for members to have the majority of their savings in the stock funds. If the market is going lateral or trending down, we may suggest for members to have most of their savings in the G or F Funds. How long they must stay in these funds is only known by Mr. Market. Meaning, we have to see a change in character of the market and/or notice something through technical analysis that warrants caution or the likelihood of profitability. Hopefully we recognize the potential of change before it happens. All we can say, is that we assess the current market condition on a day-to-day basis and present our opinion to the best of our ability.

Our service is designed to consistently outperform the buy-and-hold strategy of investing on a yearly basis. Our primary objective is to help government employees increase their Thrift Savings in a low risk / high reward manner in both bullish and bearish markets. Bottom line: Our primary goal is to help our members move their thrift savings forward. We believe that market timing through proper use of technical analysis is the only method in acheiving this goal.

Our system is based on mathematical models of technical analysis and our proprietary methodology, which is not available to the public. We use raw stock data (i.e., previous price data and volume) and incorporate this into certain mathematical models. From this information, charts are produced with technical indicators. We then annotate and interpret the charts using our experience, and provide a short-term forecast based on our wisdom. With over 20 years of experience in technical analysis, our interpretation of the data becomes relatively standard in seeing the broader oversold/overbought conditions and bullish/bearish divergences of the indexes. We concentrate on risk-to-reward probabilities using technical analysis to establish short and intermediate-term forecasts of the market indices.

We will post our comments on the members only page each Friday. After the page has been updated, members will receive an immediate e-mail alert. Also, when there has been a change in character of the market, we will suggest to make an Interfund Transfer. This e-mail will show the exact breakdown of percentages for the various funds.

This is entirely up to you and your professional advisor for a final decision. In general, the answer is yes.

For the most part, the answer is no. We are always aware of the financial news, but this is not directly factored. However, the mathematical equations used to derive the indicators and signals, captures all fundamental data. Fundamentalists will always try to explain movements of the stock market based on reasoning. Fundamentalists can always come up with justifications or reasons why the market moved in a certain direction. But we have found that applying those justifications to the next situation or trying to determine the next direction of the market is nearly impossible. Fundamentals can not be applied on a short-term basis to consistently beat the market.

Our members are civilians or uniformed service (Army, Navy, Air Force, Marines, and the Coast Guard) employees who are part of the FERS (Federal Employees Retirement System). Even Federal employees who left the government service, can still make interfund transfers. We believe our members are not professional investors, stockbrokers, money managers, financial planners and investment advisors. Our members are hard-working government employees who seek guidance in the stock market and want to maximize their hard-earned retirement savings. We also believe our members are those who may have tried the buy-and-hold strategy, and have lost money through this strategy.

Yes, we trade all of them. We believe our system provides a lower risk method of investing, as opposed to the buy-and-hold strategy of investing. The buy-and-hold method will always be subject to higher risk, volatility, and many uncontrollable factors that can negatively impact the stock fund prices and your savings. Everyone should be familiar with the crash of 2000 through 2002, when the C Fund lost nearly 50% of its value. All of my friends lost money during that time. One friend chose to leave his savings during that time in the C Fund and took a $60,000 loss. Then, when the S&P was at bottom in the 3rd quarter of 2002, he decided to cash out of the stock market all together, swore to never get back in it ever again, and put his savings into the G Fund. Now, it will be difficult for him to rebuild his savings back to where they initially were in year 2000 based on the annual gains of the G Fund. Another friend, who always believed strongly in the G Fund, never cared to venture out into the C Fund. But, when everyone else were talking about how much money they were making in the stock market (C Fund) during 1995 through 2000, he finally decided to jump in and switch to the C Fund like everyone else. However, his timing was totally wrong ... he made the big switch in April 2000. It was relatively easy for me to identify the bull market was over in year 2000, since the 50-day moving average cross below the 200-day moving average, and the major uptrend was broken to the downside. These criteria defined the initiation of a major bear market was in store for a couple of years. During that time, years 2000 - 2002, everyone should have been allocating most of their funds into the G or F Funds, and not into the C Fund, hoping for it to come back. Investors should have waited until there was confirmation of a new major uptrend and the 50-dma crossed above the 200-dma. Simple rules that can significantly protect and preserve one's capital, and wait for better times.