It was a tough week for the TSP stock funds. While the long term trend still looks solid, the short term is looking very shaky. Keeping both the long and short term time frames in perspective is going to be critical over the next several months. In the long term I expect prices to continue higher, but not in a straight line… I would expect to see more high volatility days like Friday as we approach Sep/Oct. For the week, the C fund was down 0.25%, the S fund was up 0.65%, and the I fund was down 2.03%.
The 3 year weekly chart below looks very strong. While we did have a negative reversal this week, it came on relatively light volume. This is a very good sign. After 5 consecutive weeks of prices moving higher, one down week on low volume is not a cause for concern.
The short term charts tell a much different story with all 3 TSP stock fund charts flashing a red flag. The S&P500 (C fund) chart below shows a failed first test of the highs from January. We should expect some continued weakness next week based on Friday’s gap down. Ideally we’d see support at the 2800 level but, prices could test the lower channel line at 2775 before the next attempt at a breakout to new all time highs.
The S fund is still forming its bullish triangle consolidation pattern. Unfortunately, as the price chart is trending up in the consolidation, the technical indicators are trending down. This divergence is something to watch but the price chart is always the primary driver. We’re looking for a solid close above 1470 to begin a new leg higher.
Friday was a tough day for the I fund. After gapping down 2% thru its 50DMA, it finally found some support near the bottom channel line. A 2% gap down is significant but not fatal yet… A daily close below 65.50 would be a game changer. The technical indicators have room to move lower so I would not buy the I fund at this point.
We are entering the most volatile time of year for the stock market. Friday’s gap down could be the first shot across the bow of what will surely be an interesting fall season. Stay alert and keep both the long and short term time frames in perspective.
Have a great week!