You couldn’t have packed much more into a holiday shortened trading week.  What a wild ride!  For the week, the C fund was up 0.49%, the S fund was up 1.05%, and the I fund was down 0.31%.

Given the number of significant events this past week, conventional wisdom would tell you that the market should have tanked!  We had the on again/off again summit planning with North Korea, the collapse of the Italian bond market, import tariffs slapped on steel and aluminum from Mexico and the EU, just to name a few…  If the news/current events drive the stock market, how could the market possibly finish higher for the week??   Answer, the news DOES NOT drive the market. 

If you make TSP reallocation decisions based on the daily financial news, you will get CRUSHED.  It can be tough, especially when you see your account take a big one day hit.  Don’t allow yourself to get sucked into the news cycle frenzy.  Understand the charts, trend lines, and resistance levels. This will keep you from losing sleep during times of high volatility. 

Short Term  

Over the past 3 weeks, the S&P500 (C Fund) has traded in a very tight 1.66% trading range, with the exception of the shake out day on Thursday of this week.  The shake out day tested support at both the 50DMA and the upper triangle trend line.  This SHOULD BE a great set up for a continued move higher.  A daily close above 2750 will really solidify this new rally. 

If all goes well, the S fund will continue leading this market higher.  It is bumping up against resistance at its prior all time high right now.  We just need one more bump with a close above 1420 to really see the S fund move higher. 

The I fund is another story… Right in the middle of a well-defined horizontal channel, the I fund consolidation pattern is very different from the C and S patterns.   This isn’t something to worry about, just something to observe. All 3 of the TSP stock funds are in (or just breaking out) of consolidation.  As long as the I fund stays above the bottom channel line, we’re in good shape.

Long Term

If we step back a little bit, we can see that we actually had another very constructive week.  The weekly chart of the S fund gives us every indication that the rally will continue.  The price chart looks very strong the the indicators turned positive and are moving higher.

It really looks like the market wants another leg higher.  We have been consolidating since late January and USUALLY, consolidations resolve in the direction of the original trend, which is up.  Having said that, we need to see a day (preferably a week) of big price moves with BIG volume.  The smart money has not sold into this rally but they have not bought into it either…  It’s very likely that volatility will continue through the summer so stand-by for heavy seas…

Have a great week!

Jerry