Sunday Update: 06 October 2019

It was a volatile start to October and the 4th quarter.  The C fund had about a 4.5% price swing from high to low this week.  In the end, the C fund finished the week down 0.33%, S fund down 0.66%, and the I fund down 1.23%.  Thursday’s reversal and Friday’s follow thru days were important in attempting to keep this rally alive.  By the close on Friday, each of the TSP stock fund charts were in a different posture from a technical analysis perspective.  We’ll look at each of them in detail below.  

First, let’s take a look at Shadows; what they mean, and when do they occur…  The chart type I utilize in these posts is called Candle Sticks.  They are the red or white rectangles, sometimes with Shadows, that represent the time period of the chart.  In the chart below, each candle stick represents 1 week.  A black outline around the candle stick tells us the price closed higher than last week.  A red outline tells us the price closed lower than last week.  Candle sticks convey a wealth of information in visual chart format.  Click here for a deep dive.   The Shadow is the line above (aka wick) or below (aka tail) the rectangle.  Understanding shadows is very important because they ALMOST ALWAYS indicate a change in the immediate trend.  Long tails are often found at market bottoms while long wicks are often found at market tops.

The 2 year weekly chart of the C fund below gives us numerous examples of reversals that began with shadows.  The two best examples are the Feb 2018 and Dec 2018 tails.  In Feb 2018 the C fund had collapsed over 2 consecutive weeks on very high volume.  The intra-week low price (bottom of the tail) was just above the 200WMA.  Ultimately the week closed at about 2625; 100 points above the bottom of the weekly tail.  This marked a near term bottom as the market rallied higher for the following 5 weeks.  In Dec 2018, the intra-week low hit the 200WMA before reversing to close the week significantly higher.  This marked the bottom for 2018 and began the monster rally of early 2019.

Last week’s tail COULD signify the a bottom but it doesn’t really fit the pattern.  A tail usually happens to reverse a very strong downward move.  Last week didn’t reverse a significant decline, volume was relatively light, and the tail did not hit the 50WMA.  There was definitely some significant buying pressure on Thursday and Friday.  It will be interesting to observe how this plays out over the next several weeks.  

Short Term

The short term chart of the C fund is a bit non-committal right now.  Last week’s decline gapped through the 50DMA but did not hit the 200DMA before reversing.  I would have liked to have seen prices get down to the 200DMA and reverse from support at that level.  On the positive side, the C fund did close above its 50DMA.  The near term price pattern is a lower high and a higher low.  Bottom line is that prices could go either way from here…

The S fund chart is looking much worse than the C fund.  The S fund has collapsed thru its 50 and 200DMA.  The price pattern is  a lower high and lower low.  The only saving grace is that the price never got below the May 2019 low at 1325…  By the close on Friday, the S fund had recovered to its 200DMA but could not get above it.  We will see if the 200DMA acts as resistance for the S fund.  Even if the price continues higher, the 50DMA is the next resistance level.  The S fund is fighting an uphill battle at this point…

The I fund chart is a bit better than the S fund but still not great.  The I fund found support at its 200DMA on Thursday and recovered above its 50DMA on Friday.  If the 50DMA line crosses down thru the 200DMA then this diamond price pattern likely resolves to the downside.  We’ll have to watch and see how this plays out. 

Bottom Line: There is a lot going on in the market but little indication of a strong push in either direction.  Given the current market posture, I’m happy to remain 100% G fund and wait for the market to resolve itself.

Please post questions to comments or email.  Have a great week!

Jerry