It’s been a wild first week for the markets in 2020! This time one week ago, the S&P futures were down to around 3150 as the markets were trying to process the strike on Iranian general Qassem Soleimani and potential backlash. If you look on the daily chart a week ago Friday, the C fund closed just above its 10DMA and down for the week. Conventional wisdom would expect the markets to continue lower after the Soleimani strike. Instead, the market opened a bit down but finished Monday significantly higher. The C fund found support at its 10DMA (Friday), bounced off it to the upside (Monday), and kept moving higher this week.
We have not had a daily closing price below the 10DMA in the C fund since the end of November! As long as that trend remains in place, the stock funds will continue to rise… For the week, the C fund was up 0.94%, S fund up 0.48%, and I fund up 0.26%.
While this week was ultimately very positive for the markets, Friday was a rough day. Friday opened higher but reversed and finished below Thursday’s low. This is a bearish engulfing pattern and is often seen at the top of a rally. We’ll see next week…
Before we get into the TSP stock fund charts, let’s take a look at the F fund. The F fund did very well as interest rates fell continuously in late 2018 and early 2019. The F fund has been in a triangle consolidation for the past 4 months and may be ready to breakout. A weekly close above 113.20 (the Sep 2019 high) would be a perfect buy point for the F fund. If the stock funds roll over in early 2020, the F fund may be a more lucrative alternative to the G fund…
The C Fund has had a great run since gapping up thru its 10DMA and 50DMA last October. The price pattern has progressed in 5 waves, culminating with a bearish engulfing day on Friday. I would expect at least a short term pause in the market here. If we do get a roll over, I’m looking at POSSIBLY getting back into the stock funds around the 3100 level.
The S Fund broke out to new highs this week but Friday’s move lower really hurt the prospects for higher prices. Much like the C fund, the S fund is at the top of a 5 wave move higher since the October low. If we got a close below 1500, I would look to get back into the S fund around 1450.
I Fund gapped up to new highs at the beginning of January but has since withdrawn to its consolidation zone. It’s just barely holding above its 10DMA. A close below 69, the lower end of the consolidation zone, would be a serious red flag.
Bottom Line: The trend is your friend, and the trend is still up (FOR NOW). Watch for a close below the 10DMA on the C fund. That will be the first indication of a potential trend change.
Have a great week!