Current Allocation: 50% C Fund, 50% G Fund
It was a pretty good week for the TSP stock funds. All 3 funds were up significantly for the week and there are some technical reasons to be encouraged. Having said that, there are also some reasons to continue with caution…
The short term chart of the S&P500 (C Fund) below shows a great example of support at the 50 Day Moving Average (DMA). The 50DMA line is the rolling 50 day average price. This line smooths out the daily ups / downs and is a great technical indicator. As long as the price continues to find support and stays above the 50DMA, the trend is up. When the price falls below it, and the 50DMA becomes resistance, the trend is down. The price chart was pretty extended above the 50DMA when it hit the most recent high of 2400. Over the past few weeks the price has come down in a well defined a-b-c pattern to find support at the 50DMA. This is exactly the kind of retracement we want to see following a big price move up off the November 2016 lows.
Other than Friday’s reversal, the short term chart looks great. The bounce off the 50DMA looks good and the technical indicators are turning positive. We are not out of the woods until the C fund closes above 2400 but we’re looking good so far.
The long term charts are not looking as good. While it was a strong week, both the weekly low and hi were lower than last week. This is an indication of weakness. Add to that, the indicators turning negative and we could see some headwinds over the next couple of months.
The I fund has been the outlier since the November 2016 lows. The I fund has enjoyed 19 weeks of almost uninterrupted gains but, it’s definitely due for a correction…
It’s the beginning of the month. Since only the first 2 reallocations can increase exposure to the stock funds, you want to use those moves very wisely. That means only moving when the market has signaled a definite change in direction. As of this weekend, I’m feeling very comfortable with our current allocation of 50% C fund and 50% G fund.
Have a great week and please SHARE.