Sunday Update: 01 March 2020

Wow, what a week!  If you were too focused on Coronavirus to track the stock market, you missed an historic week; and it was UGLY.  This week’s losses were on par with the worst week of the financial crisis in 2008.  Amazingly, it was just 7 trading days ago that the C fund hit a new All Time High…  We are a LONG way from that now.  For the week, the C fund was down 11.49%, S fund down 11.60%, I fund down 8.82%, and F fund UP 1.15%.   

There are lots of ways to play the TSP game.  The #1 Rule that governs the GrowMyThriftSavingsPlan methodology is “Don’t Lose Money!”.  This week was a brutal example of why that rule is so important.  IF you were evenly distributed between the 3 stock funds, your TSP account decreased by more than 10.5% this week.  IF you are a subscriber to GrowMyThriftSavingsPlan, and follow the Current Allocations, your TSP account INCREASED by approximately 0.4% this week!

This is NOT market timing.  There is no crystal ball here.  This is minimizing risk and maximizing gains by adhering to technical analysis principles.  I strongly suggest you go back and read last weekend’s Sunday Update and the 24 February Update…  

The big question on everyone’s mind is, where does the market go from here??  A better question for us might be, what are the next possible support levels?  The first question is open-ended and invites a fear, greed, or emotion based answer.  The second question takes away the emotion, focusing us on analyzing the charts to make logical allocation decisions going forward.  

Short Term

The short term (6 month) chart of the C fund below is ugly!  The past 7 trading days have wiped out the past 6 months of gains.  The losses were so drastic this week that the 6 month daily chart is no longer a broad enough time frame to use in identifying potential support levels.  (Posting here just because it’s a VERY UGLY chart…)

Long Term

Since the 6 month daily chart is not helpful, lets broaden the view using a monthly chart back to the 2009 low.  We’re going to look at a trend line analysis and a Fibonacci retracement analysis as POSSIBLE areas of support for this correction.  Again, this a LONG TERM perspective.  These are guidelines, not designed to forecast which direction the market will move next week…

The long term trend line in the monthly C fund chart below is very strong.  The line has been tested 3 times in the past 12 years with prices finding support each time.  A monthly close below this trend line would be a major red flag for prices going forward.  I do expect the C fund to test this support level, at a minimum, before prices are able to recover to new highs.  

 IF the long term trend line does not hold, the next support levels can be identified thru Fibonacci ratios.  The 38%, 50% and 62% retracement levels are most common.  IF the long term trend line in the above chart fails, I would expect the C fund to bottom between 1700 and 2350; most likely the 50% area of 2000.    

Bottom Line: There are no important support levels until the 12 year trend line.  We still have a long way to go before the market gets down that low.  It could take several months to hit that line.  Until then, market risk is very high.  Expect to see wild swings, both up and down, over the coming days and weeks.  The trading range is 3400 on the high side and the long term trend line on the low side…

Have a great week!

Jerry