Sunday Update: 15 March 2020

It was another Hellish week for the TSP stock funds.  For a little perspective, the market hasn’t fallen this far this fast since the “Black Monday Crash” of 1987, when the the Dow Jones collapsed 35% over a 17 day period!  For the week the C fund was down 8.79%, S fund down 15.59%, I fund down 14.32%, and the F fund down 5.09%.  Even after Friday’s 9% gain, the S&P500 (C Fund) currently sits over 20% below its February high!  

If you have been following the Sunday Updates for the past couple of months, you had all the tools and analysis necessary to avoid this collapse.

If you are a Member of the site, and followed the Alerts, your TSP account is more than 3% HIGHER than the February high!  And, with 75% still in the G fund, you are in a perfect position to maximize gains when a bottom is confirmed.  Most importantly, you can sleep well knowing very little of your TSP is exposed to any market risk.  At $12 per month or $120 per year, it is a NO BRAINER!  Sign up here...

This week we will get a long, medium and short term perspective, identify some POSSIBLE support levels, and learn to make reallocation decisions going forward based on technical analysis; not FEAR or GREED.

Long Term

In the 12 year, C fund chart below, each red or white vertical line represents 1 month.  The most recent red line represents March to date.  The diagonal blue line connecting the bottoms is the Long Term Trend Line.  Each time the C fund has hit this line, for the past 12 years, it has rallied higher.  Friday’s 9% rally pushed the month to date close back above the moving average line.  Will this support hold?  We don’t know; no crystal ball here!  What we do know is that there is long term support along this line.  

IF the long term trend line does not hold, the next support levels are the Fibonacci retracement levels identified on the chart.  If we do not find an ultimate bottom at the trend line, we will most likely see it at the 38%, 50%, OR 62% Fibonacci retracement levels.  These are the upcoming POSSIBLE support levels.  These are the levels you need to watch over the next several months to make educated reallocation decisions…

Medium Term

The 5 year weekly chart of the C fund below shows that the market has gone essentially straight down for the past 3 weeks.  By the low this Thursday, the C fund had given back almost all of the gains it had made since the low of 2018!  Although the intra-week price did pierce the long term trend line, the C fund reversed and closed the week significantly above the line.  Watch closely next week to see if this line will hold.

The S fund lost even more ground, closing the week even with its 2018 low.  While the intra-week price did get below the 2018 low, the weekly close was just above the prior low.  If we have found a short term bottom here, the S fund will need to stay above the 1150 level next week.

The I fund chart is very tough to see.  After forming a clear Double Top pattern with January’s high, the I fund has collapsed all the way back to late 2016 levels!  The next major support level for the I fund is the 2016 lows…

Short Term

Given the 2 reallocation per month rule, the 6 month daily chart has been the best time frame to utilize in making TSP reallocation decisions.  Unfortunately, the market has fallen so far so fast, that the moving averages cannot keep up.  Even so, you can see that last week’s attempted rally pushed prices back up to the 10DMA before rolling over again in a big way! Right now, the 10DMA is acting as serious resistance and the price is still more than 6% below the moving average.  With such huge price swings in both directions over the past 3 weeks, reallocating in this environment can be gut wrenching!  We want to see a bottom stabilize here; meaning the price stays above 2500.  Next, we want to see the price close above the 10DMA.  This will give us the best odds of getting back into the stock funds when they are most likely to move higher.  IF you get back into the stock funds when the C fund gets above its 10DMA, your downside risk will be the difference between the price you pay above the 10DMA and 2500; assuming you will reallocate to the G fund if the 2500 bottom does not hold.  This is how you quantify risk and decide an acceptable level for your personal risk tolerance and life circumstances…

Bottom Line: We are in a serious Bear Market.  We haven’t seen anything like this since the financial crisis in 2008.  It is possible but EXTREMELY unlikely that the ultimate bottom is in.  We could be at a short term bottom where prices retrace 38%, 50%, or 62% of their loss from the high.  We will look at this in detail next week.  Bear markets are extremely volatile and notorious for sucking you into relief rallies only to roll over to new lows.  IF you are going to reallocate in this environment, you must be prepared for big price swings and potentially serious losses.

Much like COVID-19, the Bear Market of 2020 will come to an end eventually.  This is not a time to try and make money in the market.  It’s a time to really focus on rule #1; Don’t Lose Money! 

Have a great week!

Jerry