The market hit a SIGNIFICANT milestone this week by closing above it’s 50WMA on a weekly basis AND its 200DMA on a daily basis.  We are not out of the woods yet!  The market has recovered extremely fast since the December 2018 low.  Eventually this rally will have to take a breather but in the meantime, it pays to respect the moving average lines…  For the week the C fund was up 2.5%, S fund up 3.33%, and I fund up 2.58%.

Long Term

In the 10 year C fund chart below we can see that the 50WMA (Week Moving Average) is an important line to watch.  When prices are above this line, they tend to move higher over time.  When prices are below this line, the C fund is consolidating or correcting.  IF you’re a long term, hands off investor, this is an easy way to grow your TSP account while minimizing downside risk.  *Be in the Stock Funds when the S&P500 (C Fund) is above the 50 Week Moving Average.  Be in the G Fund when the S&P500 is below the 50 Week Moving Average*  

Medium Term

In the 3 year C fund chart below we can see that this week was the first strong close above the 50WMA since early 2016!  We are not out of the woods yet.  We can expect to see resistance at the 2800 level and the prior high at 2950.  The 50WMA gives us a very useful guide at this point.  As long as the C fund stays above the 50WMA, risk in the stock funds is relatively low.  If the market rolls over and closes below the 50WMA then stock fund risk is higher.

Short Term

The short term perspective is quite a bit different from the medium term.  While the C and S fund have broken thru their respective 200DMA, the technical indicators are very over bought.  I would not be surprised to see a short term pull back this week as support above the 200DMA is tested.  

Bottom line

We are finally back at a price level where we are not guessing.  As long as the C fund stays above its 50WMA stock prices will move higher.  There are still headwinds unless/until we close above the October 2018 high.  Having said that, this week’s close above the 50WMA and the 200DMA decreases market risk significantly going forward.  

Have a great week!

Jerry