It was a relatively constructive week for the TSP stock funds.  All 3 funds were in the black but, as is always the case, there is much more to the story than the final weekly % gain/loss.  For the week the C fund was up 0.93%, the S fund was up 0.34%, and the I fund was up 0.03%.  

This week we’re going to swap out the RSI indicator for the Williams%R.  Williams is another Overbought/Oversold indicator that can help us identify a temporary top/bottom in any of the 3 TSP stock funds.  The Williams indicator is a bit different than the RSI and tends to lead the price chart a bit.  When used in conjunction with the moving averages, resistance levels, and trend lines, it’s a useful tool for identifying turns in the market.  If you like it, add it to your tool box!

We’re going to look at the 3 year, weekly chart of the 3 stock funds first.  The weekly perspective definitely helps to separate the forest from the trees.  Next we’ll look at the 1 year, daily charts and see how helpful the indicators can be when used in conjunction with the price chart.

Long Term

The long term C fund chart looks very strong.  It would be nice to see more volume on a week where the price gapped up.  Also, it would have been a stronger bullish signal if we had ended the week at the top of the weekly range.  Having said that, the technical indicators look very strong, with the expectation of continued positive price movement as we head into the Fall.

The long term S fund chart is the best of the 3 funds.  The S fund built a base on base triangle consolidation since the high in January.  We can see the isosceles triangle from January to May, then the bullish triangle base from June thru August.  Last week was the breakout that should continue for the next several months.  The MACD and Williams both support higher prices going forward.  

The long term I fund chart is not looking good.  We can see lower highs and lower lows since the May high.  The I fund is in a down trend.  The next low could very possibly close below 65, the kiss of death.  We saw a reversal at the 50WMA this week, indicating a perfect time to get out of the I fund if you’re still invested in it…

Short Term

The short term, like the long term, shows the C and S funds in pretty good shape but the I fund having price problems supported by the technical indicators.  The C fund finally made new all-time highs this week!  Hopefully the C can stay above the 2875 level so the ceiling becomes the floor.  We had a bit of a pause following the gap up on Monday but, with the technical indicators still positive, the C fund is looking pretty strong in the short run.

The S fund mostly consolidated this week as it tries to push thru the 1500 level.  With the technical indicators looking very strong, the S fund should move higher over the next few weeks.  When the MACD gets up to 20 and the Williams%R breaks down below 20, that will be the time to sell the S fund and lock-in some gains.

The I fund is pretty much not tradable for TSP investors at this point.  The daily volatility is so high, with only 2 moves per month, TSP investors cannot take advantage of current upswings in the I fund’s channel.  On Monday the I fund gapped up thru its 50DMA only to be stopped at its 200DMA on Wednesday.  By Friday it had fallen below its 50DMA with Williams%R indicating more price decline over the next couple of weeks.  The I fund is not looking good in the long or short term…    

There is definitely as much art as science in technical analysis and chart interpretation.  The Williams%R is a very powerful tool for identifying when the stock funds are overbought and oversold.  Having said that’s just because a fund is overbought does not mean it’s about to roll over.  A fund or stock can stay over bought for a long time as momentum drives prices higher.  This tends to be the case in overall rising markets.  The reverse is true in overall falling markets.  Again, Williams%R is just another tool.  If you like it, throw it in the box.  If you’re really interested, you can see a full explanation of the math behind the indicators at the Chart School.  

Have a great week!

Jerry