* Alert Analysis * : 10 May 2021

The market gave us quite the head-fake last week! On Tuesday, the C fund gapped down and tested the mid-April lows before reversing. It closed below its 10DMA for the first time since last March. This, along with a very rough day for the S fund, generated last week’s Alert. When we look back on the C fund chart below, every time price closed below its 10DMA, it found support at its 50DMA. Our risk last Tuesday was a 4% loss down to the 50MDA. That was not a risk that I was willing to take. What a difference a couple of days can make! The C fund reversed course on Thursday and put in a clear breakout on Friday.

The rally that began at the low in March 2020 is still in play BUT, 2021 is NOT the same as 2020! The tech stocks that did very well during the CoVid pandemic are not the stocks that are fueling the current phase of this overall market rally. New leadership includes Metals, Mining, and Infrastructure stocks. For our purposes in TSP, that means the C and I funds are out-performing the tech heavy S fund.

The S fund may not completely roll over but, it is clearly taking a back seat to the C and I funds. IF/When the s fund clears resistance at 2250, it could re-take the leadership position. For now, the S fund is not where I want my TSP funds allocated.

The I fund has potentially turned a corner. We have been watching the I fund for several months, looking for confirmation of a change in leadership. It’s possible that we are seeing that rotation happening now. With a huge price move higher, on big volume and MACD crossing higher, the I fund is looking very strong.

The TSP stock funds are moving higher. If you want to be well diversified, or if you have not given up on tech, reallocating evenly between the 3 TSP stock funds is a great way to play the current market. IF you want to be in the funds that are out-performing, then comparison charts are extremely valuable. The 3 year weekly chart of the S fund versus the C fund tells the whole story. The S fund had clearly out-performed the C fund from the March 2020 low until March 2021. At that point, tech started to unravel and the C fund began to out-perform. The last couple of weeks have really shown the inability of the S fund to find support relative to the C fund.

The S fund vs the I fund looks similar. Where the S fund was the clear leader since the March 2020 bottom, it was now taken a back seat to both the C and I funds.

The only question remaining is the C fund relative to the I fund. The C fund had been out-performing the I fund for the past several years. You can see A bottom forming in the chart below. With the May low higher than the October 2020 low, we could see the I fund begin an extended period of out-performance. At the very least, the C and I funds have been performing at the same relative level since early in 2020.

Bottom Line: The C and I funds are clearly the relative leaders now, and likely going forward. If/When the S fund comes back into favor, we will see it in the charts.

Last week’s head-fake was unfortunate but, our response to the price action was reasonable. Now that the market is back in rally mode, hopefully it will stay there for a while… With Friday’s breakout, the C fund is now further extended above its 50MDA. A close below the 10DMA would be the next serious red flag… Stay tuned.

Jerry