Sunday Update: 04 August 2019
It was a very rough week for the TSP stock funds. In fact, this first week of August was the worst performing week of 2019! By the closing bell on Friday the C fund was down 3.10%, S fund down 3.53% and I fund down 2.75%. We’re going to take a short term, detailed look at what happened this week on the C fund, then a longer term view of each TSP stock fund chart.
As long time readers of the Sunday Update understand, the TSP is a long term, wealth accumulation vehicle. It is NOT a day trading platform. The goal is not to “Time the Market”. The goal is to maximize gains and minimize risk by being fully invested in the stock funds when the market trend is up and in the G fund when the market trend is down. This is accomplished by utilizing technical analysis to identify price patterns, support and resistance levels, and market risk. We also need to take into account the TSP’s 2 move per month rule. With all that in mind, along with your personal risk tolerance, this week’s loss may have presented you with an opportunity to make an informed reallocation decision.
Weekly charts are best given the TSP rules but, when it comes right down to it, execution of a reallocation happens on a specific day and time. So while the weekly charts provide the big picture, the daily/intra-day charts become important when making final decisions and pulling the trigger. The C fund chart below shows what happened this week in 10 minute increments…
This Week on the C Fund
As we discussed in last week’s Sunday Update, the C fund was riding a short term trend line that had been in place since the beginning of June. On Wednesday afternoon, prices fell sharply thru the trend line but recovered much of the losses by the end of the day. By Thursday afternoon, the C fund had recovered all the way back to the trend line. What had been support has now become resistance as the C fund rolled over hard on Thursday afternoon.
Given that the long term C fund chart has been approaching the upper channel line for several weeks, market risk has been quite high. With that as the back drop, this price collapse thru the short term trend line COULD be the trigger that begins a longer term decline. Given the analysis of the chart below and your personal risk tolerance, cutting your losses after the price collapse on Thursday was the best you could have done. This would give you Friday’s closing price.
The C fund has been flirting with resistance at the upper channel line for several weeks since breaking out above 2950. The 2950 level then became the line in the sand for me. This week’s close at 2932 pushes the price back down into the trading range. We are likely to test the lower channel line before hitting the upper channel line again (a loss of 25% from Friday’s close). More about this as the pattern plays out over the next several weeks.
We had been talking about the need for the S fund to clear the 1450 level for several weeks. Last Friday’s close above 1450 was an extremely positive sign. Unfortunately, this week’s price collapse invalidates the pattern and pushes us back into the trading range. We COULD get some support at the 50WMA (blue line) but, I would expect the S fund to fall below 1300 before making another serious run higher.
The I fund broke out above 66 during the first week of July. Since then it had been forming a tight consolidation. This week’s price collapse invalidates the attempted breakout and sets us up for lower prices going forward.
Bottom Line: This week PROBABLY represents a serious shift in the market. Market risk is extremely high and I would expect prices of all 3 TSP stock funds to continue lower. As always, you need to take into account your personal risk tolerance when making TSP reallocation decisions.
Members of the site received a detailed explanation of when and why I made a reallocation within my personal TSP account this week. If you want to know what I’m doing within my personal TSP account BEFORE I make any reallocation, sign up to be a Member of the site.
Have a great week!