Sunday Update: 20 May 2018

The TSP stock funds were a mixed bag this week but still very constructive in terms of the pattern.  For the week, the S&P500 (C fund) was down 0.54%, S fund was up 0.62%, and the I fund was down 0.61%.  We’re going to take a quick look at the daily C fund chart and then focus on the longer term charts as they are most important in making reallocation decisions.

Short Term

The 8 month daily chart of the C fund below shows that we consolidated this week after the last move up that began on 3 May.  On 9 and 10 May we saw the move above the 50DMA and the gap up thru the trend line.  Unfortunately, both events occurred on relatively low volume.  This is not ideal and the rally remains in question until we see a follow thru day on big volume.  Support is forming at 2700 and a daily close below 2650 would be a problem.

Long Term

While we have to keep an eye on the daily price fluctuations, the weekly charts are much more important to TSP investors.  Since we only have 2 reallocation possibilities per month, watching the weekly charts keeps us from getting whipped around in the daily volatility.  

The C fund chart below is looking good.  We have clear support at the 50WMA (Week Moving Average) with low volume consolidation this week following last weeks big price move.  We are looking for the MACD lines to cross back up and the Stochastic to turn positive as confirmation of this rally.  A weekly close below the 50WMA would change everything.  That means that our potential downside risk in the C fund right now is 4.3%.  

The S fund weekly chart is looking very strong.  The upside reversal this week with a higher finish is a very positive sign for the S fund.  The MACD and Stochastic are just breaking positive and the RSI indicator is rising.  All indications of a strong market.  Remember, the S fund represents the Dow Jones Total Stock Market Index.  This includes small, medium and large companies and is a better representation of the overall market than the C fund.  A weekly close above 1420 on the S fund would be a new all time high and a huge psychological boost for the market.  We are only 20 points away!

The I fund is hitting a ceiling at 72.  We need to see a weekly close above 72 and then it’s off to test the prior high of 75.5.  We need to see the indicators confirm this rally by turning positive along with a move thru the 72 level.  Again, a weekly close below the 50WMA would be a problem.

While this week was not great in terms of price movement, a consolidation following the prior week’s big price move is to be expected.  For now, the market is looking strong overall but, we are definitely not out of the woods.  When all 3 TSP stock fund charts close above their respective January highs, then we’ll be off and running.  In the mean time, expect volatility to continue on a daily basis and keep an eye on the weekly charts 50WMA.

Have a great week!

Jerry