Technical Analysis Takes Away The Guesswork

Volatility has been the name of the game for the past 2 weeks! The S&P500 (C fund) has been jumping above and below its 10DMA (Day Moving Average) in relatively large intra-day swings. As of today’s close, all 3 TSP stock funds are below their respective 10DMA lines. When price is below the 10DMA, it tends to continue lower. When price is above its 10DMA, it tends to continue higher. This can bee seen in all 3 charts below.

The C fund took away half of yesterday’s gains, closed at the bottom of the days trading range, and below its 10DMA line. Importantly, we now have a downward trend line as each daily high cannot get higher than the previous days high. This is a bearish sign.

The S fund had the worst performance today of all 3 TSP stock funds. Not only did it have the sharpest price decline, it also had a bearish engulfing day. This means that the daily price range engulfed yesterdays price range. This is a bearish signal.

While still down for the day, the I fund outperformed the C and S funds. The I fund hit resistance at its 10DMA and couldn’t get above it but, also did not close at the bottom of the daily range.

Bottom Line: We use technical analysis, including trend lines and moving average lines, to help us determine which direction price is likely to go. As of now, there is not enough data to make a reallocation decision based on the analysis. We need to see price find support above the 10DMA to get back into the stock funds, OR close below the 50DMA to exit the stock funds completely.

The beauty of technical analysis is that it takes away the emotion and allows us to be positioned on the right side of the market, as soon into the trend as possible.

Please post questions to comments!

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Jerry