We’ve been talking about this for many weeks in the Sunday Update.  October is upon us and, as expected, the volatility has begun…  All 3 TSP stock funds AND the F fund (bonds) finished the week lower.  Only the G fund was in the black (which is required by statute…).  For the week the C fund was down -0.97%, the S fund down -3.24%, the I fund down -2.32% and the F fund down -0.89%.  

What was the cause of this week’s melt down?  Is this just normal October market behavior?  Is it because of the Supreme Court nomination process? Or maybe expanded tariffs?  What about the spike in long term interest rates this week?…  It all goes into the mix and gets reflected in the price.  The big question you’ll need to answer is, given this environment, how will I reallocate to maximize gains and minimize downside risk?

F Fund

Most TSP participants that actively manage their account don’t utilize the F fund.  People that do tend to believe that when stocks go down, bonds (F fund) go up.  Sometimes this is true but when interest rates spike up, the yield on the F fund goes up which pushes prices down, as you can see happened this week.  The F fund had been trying to get back above its trend line but, it’s not looking good.  The F fund is NOT the place to be if stocks continue lower.

C Fund

The C fund was down almost 1% for the week but still sits 3% above its trend line.  With the indicators rolling over and no short term support, I would not be surprised to see the C fund drop down to support at the 2800 level.

In the short term, the C fund is sitting on important support.  It’s at the intersection of the January high and its short term trend line.  Friday was a down day but stopped short of breaking below the support level.  We’ll have to see how next week plays out.

S Fund

The S fund had been drifting lower for the past few weeks but took a pounding this week!  The S fund dipped below the trend line a bit but reversed and closed the week right on the line.  With indicators rolling over this week, I wouldn’t give the S fund much more room before selling it.

In the short term, the S fund is extremely over sold.  We SHOULD see a relief rally next week.  Based on the long term chart above, I’m looking for a rebound to the 1460 area +/- to sell the S fund.  I will be looking closely at all of the technical indicators to make that decision ultimately.

I Fund

The I fund attempted a breakout 2 weeks ago, having gapped up and finished at the high for the week.  Unfortunately, the breakout failed this week, having closed the gap and ending the week almost at the bottom of the trading range.  The I fund is still firmly set in the mostly sideways consolidation.

In the short term, the I fund is almost back down to the channel lows.  A move back above 80 on the Wm%R could be a great time to allocate into the I fund on an anticipated run back up to the 69 level.  A price close below 65 would be the final blow to this consolidation.

It’s October, market risk is high, and we are in the late stages of the long term rally that began in 2009.  It’s possible that the support levels could hold and we could come out of October moving higher through the remainder of 2018.  IF that happens, it will not be in a straight line.  Volatility will continue so, if you are risk averse, the G fund is your friend right now…

Have a great week!

Jerry