Sunday Update: 01 April 2018

Happy Easter and April Fools Day!  

It was a shortened holiday week for U.S stocks.  Feels like the market wants to keep us in suspense for the weekend before deciding which way to break.  We saw lots of intra-day movement (volatility) this week but very little progress in terms of a trend direction.  Let’s take a look at the weekly volatility first and then see how it affected the longer trend.

Very Short Term

Below is a chart of the S&P500 (C Fund) this week where each tick is 5 minutes.  We had 3+% moves up and down throughout the 4 trading days.  In the end, the C fund closed almost where it began the week.  This time frame is not very useful for making TSP allocation decisions but, if you were a day trader, you could have made (or lost) a killing this week!  Many of us watch the stock market ticker throughout the day.  When volatility is high, like it was this week, watching the ticker will drive you crazy!  If you are a TSP only investor, I would say DO NOT WATCH the ticker.  Watch the daily closing price and definitely the weekly closing price but, try to avoid watching throughout the day.  Market volatility often translates to emotional stress volatility…

Long Term

So how did a week of big volatility affect our long term trend?  The short answer; it had very little effect.  Below is the 2 year weekly chart of the C fund.  This week’s price action did not push below the trend line, nor did it breakout upward.  It is generally positive in that it solidified the trend line as a floor.  Having said that, we need to see a strong break out to the upside from this trend line to begin a possible new rally.  

Ordinarily I would be more aggressive here and move into the stock funds.  Market risk is HIGHLY quantifiable since the C and S funds have support at their respective trend lines.   However, as I explained in last week’s Sunday Update, the I fund price action has negatively shifted the odds…

The S fund is in a precarious position with a lower high topping pattern and a weekly close just above the trend line.  A weekly close below 1275-1300 would give us a lower high and a lower low.  This would confirm a trend change for the S fund.

While the I fund had the best week of the 3 TSP stock funds, it is still clearly in the correction pattern.  68 is a critical level for the I fund.  It has held as a floor for the past 8 weeks but, a descending triangle GENERALLY resolves to the down side.  It will be very tough for the C and S funds to move higher if the I fund closes below the 68 level on a weekly basis…  This is the chart to watch very closely for the next couple of weeks.

The first quarter of 2018 is in the record books.  It’s been a wild ride for the market this year and I would expect things to continue.  Don’t stress over the day to day volatility!  Keep a close eye on the C and S trend lines and the 68 level on the I fund.  

Have a great week!

Jerry