Sunday Update: 11 August 2019

Volatility continued this week with big price swings in both directions.  After last week’s worst price performance of 2019, the S&P500 (C Fund) was down another 4% before recovering most of those losses by the close on Friday.  For the week the C fund was down 0.46%, S fund down 0.62%, and I fund down 1.19%.

Support and Resistance are important tools in your Technical Analysis tool box.  This week we’re going to take a look at the 3 year weekly charts, with a focus on Support and Resistance at the 50WMA, as a risk management tool.  Support/Resistance tends to happen at significant prior price highs/lows, at long term moving average lines, at upper/lower channel lines, and at trend lines.  While not an exact science, the value of anticipating price at support/resistance levels is pretty apparent in the charts below.

A Hypothetical  In terms of risk management, buying at the 50WMA is a very reasonable strategy as you would be buying at a well established support level.  More often than not, prices move higher from the 50WMA.  If prices continued lower and the 50WMA became resistance, this would be your trigger to sell and potentially buy back in when prices fall to support at the 200DMA.  This is one way to utilize Support/Resistance and moving average lines to manage risk when buying/selling.

C Fund 3 Year Weekly Since hitting the 50WMA in late 2016, consolidations after price runs always reverted to the 50WMA.  The early 2018 and 2019 consolidations found support at the 50WMA.  The late 2018 consolidation is visibly different, with the 50WMA acting as resistance.  Ultimately support was found at the 200WMA in December 2018.  This week’s positive reversal off of the 50WMA is a very positive sign.  The price action looks more like the early 2018 consolidation than the late 2018 consolidation.   

S Fund 3 Year Weekly  The S fund found support at its 50WMA this week as well.  While it dipped below, closing the week above the 50WMA line is a positive sign.  Having said that, the S fund’s 50WMA line itself has turned down.  This is not a good long term sign.  If prices fall thru this level on a weekly basis, it will likely find its 50WMA acting as resistance.  

I Fund 3 Year Weekly  The I fund is the worst looking chart of the group.  While it did find support right on its 50WMA, the price action of the I fund is not inspiring confidence.  A weekly close below the recent low of 62 almost guarantees prices falling to test the 200WMA and/or the last major low of 56.  

Bottom Line: All 3 TSP stock funds found support at their respective 50WMA lines this week.  This is a positive sign for the time being…  As we have observed, August/September/October are notoriously volatile months for the stock market.  Any negative price action from here likely pushes prices down to the 200WMA.  Expect big price swings in both direction for the next several months…    

Have a great week!

Jerry