Another week, another price advance for the TSP stock funds. For the week, the C fund added 0.39%, S fund up 0.24%, and the I fund up 0.78%. As of the close on Friday, the S fund has advanced for the last 10 consecutive weeks! How long can this rally last? No one has a crystal ball but, we do have tools/indicators that can help us make TSP reallocation decisions going forward.
Last week we focused on the Long Term possibilities. If you didn’t read last weeks post, please check it out here. In the long term, we are still in a bit of “No Man’s Land”. In the short term however, prices are hitting some important resistance levels. This week we will focus on the Short Term charts to manage expectations going forward over the next several weeks.
The first chart below is for a little perspective. On a weekly basis, the C fund can still move significantly higher. The RSI has not topped out. The MACD is still relatively low (but the Stochastic is very high). Finally, Williams % R (Wm%R) just got above the 20 line in early February. As you can see, Wm%R can stay elevated for several months as prices continue to rise. Having said all that, the rate of increase that we have seen for the past 10 weeks is not sustainable. A pull back is inevitable. Prices have reversed at or near 2800 5 times in 2018. With the C fund sitting at 2803, we COULD see a reversal this week. The big question is, will the price chart find support at the 50WMA after the pull back…
The daily charts give us a much different view of price/technical indicators. The daily chart of the C fund below shows the price stalling at around 2800. The RSI is topped out, MACD just crossed down, and the Stochastic has been trending lower. Wm%R has been elevated for 2 months; a long time on the daily chart. IF Wm%R turns down on a big price drop, this would be the first indication to exit the C fund. A close below the 200DMA (red line) would be a confirmation to exit the C fund. The ideal pull back on a daily basis would be to the 50DMA (blue line).
The 1 year S fund chart is very similar to the C fund but is a little closer to rolling over based on the technical indicators. Both the MACD and Stochastic have turned lower and the Wm%R is just barely above the 20 line.
The I fund is hitting resistance at its 200DMA and indicators are primed for a move lower from here.
Bottom Line: This COULD be the reversal week. Watch the daily charts carefully for signs of price deterioration. If you are risk averse and have been in the stock funds for the past few months, now would be a good time to think about locking in those gains… When it comes, the pull back could be fast and severe. Stay alert this week!
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Have a great week!