It was another big week for the TSP stock funds! C fund finished up 1.58%, S fund up 2.42%, and the I fund up 0.35%. The melt-up continues with “no end in sight…”. Since there is no end in sight, how will we know when to reallocate out of the stock funds to preserve the gains we’ve seen since October 2019?
One tool we can use, from the Technical Analysis tool bag, is Moving Average Lines. Moving Average Lines smooth out the price chart by showing a rolling price average over the given time period. If we’re looking at a Daily chart, then the moving average lines I use are the 10DMA, 50DMA and 200DMA. If we’re looking at a Weekly chart then its 10WMA, 50WMA and 200WMA.
In this environment where stock prices have become so extended, the best way to capture all of the possible gains while minimizing downside losses, is to watch the 10DMA very closely. A daily close below the 10DMA is a serious red flag. In the 6 moth daily charts below, you can see that the price chart finds support at the 10DMA and rides to higher prices. When prices fall below the 10DMA, it often acts as a ceiling or resistance and prices move lower. At some point, a close below the 10DMA will be the beginning of a major correction…
C Fund 6 Month Daily
The C fund is comfortably above its 10DMA and has been in a tight consolidation for the last several days. This gives the 10DMA line a chance to catch up to the price and provide support. This is a much better than the price moving down to the 10DMA for possible support.
S Fund 6 Month Daily
The S fund had a great week! After finding support at its 10DMA on Friday, it followed through on Monday and moved higher all week.
I Fund 6 Month Daily
The I fund continues to be the laggard of the TSP stock funds. The I fund is consolidating above its 10DMA and 50DMA. A powerful breakout this week would begin a new rally. A daily close 69 would be a bad sign for the I fund.
Bottom Line: The Trend is Your Friend… until it’s not. As long as the C fund price stays above its 10DMA, the trend is up for our purposes right now. A daily close below the 10DMA COULD signal the beginning of a trend change. Stay Alert.
Have a great week!