Sunday Update: 22 March 2020

The market rout continues with all major U.S. stock market indexes logging their worst performing week since 2008.  In the big picture, there is no end in sight to this market collapse.  In fact, market wizards Goldman Sax,  JP Morgan, and others are calling for significantly lower prices before we hit a bottom.  In the very short term, the possibility for support is still in play but it does not look good…  More about that below.  For the week the C fund was down 14.98%, S fund down 17.34%, I fund down 11.08%, and F fund down 1.64%.  The only place to hide in TSP right now is the G fund…

Believe it or not, there just isn’t that much to write about right now.  Until the market puts in some kind of short term bottom, all we can do is go along for the ride.  

Very Long Term 

The 15 year monthly chart of the C fund below is in Logarithmic Scale.  It’s best to use this scale over a long time frame and/or big price swings.  In this case, we have both…  We have seen 300+ point moves in each direction on the S&P500 (C Fund) over the past 2 weeks.  On a percentage basis, a 300 point move is MUCH more significant if the price is 1000 than if the price is 3000.  Log charts give us a visual of percentage moves as opposed to point moves.

We are closing in on the first Fibonacci retracement level, from the all-time high of 3400, at 2100.  This is a very common place where market reversals tend to happen.  It DOES NOT mean the market will find support here.  It just means that we should be paying close attention for a reversal near this level.  The next major support level is the 50% Fibonacci retracement level at 1700.  This is the most common retracement level and the area where we should look for the final bottom of this Bear Market.  Having said that, A LOT can happen between now and 1700…

Long Term

The weekly chart of the C fund below is just ugly!  All of the stock market gains that have happened since late 2016 were wiped out over the past month!  On a weekly basis, the market is extremely over-sold!  This does NOT mean that a recovery is imminent but, we are WAY overdue for some kind of relief rally.  

Short Term

In the short term, there is a glimmer of hope… If you are looking to identify a potential near term bottom, these are the technicals you want to focus on.  The first step toward a near term bottom is stopping continuously lower lows.  In the 6 month daily chart of the C fund below, you can see that the intra-day low from last Wednesday is currently the low point. Friday’s closing price was lower than Wednesday and Thursday BUT the intra-day low is still above Wednesday’s low.  As long as the intra-day low remains intact, a bottom here is possible.  We need to see a big up-day next week AND a daily close above the 10DMA line to call a near term bottom.

Bottom Line: We need a defined short term bottom.  When we stop seeing almost daily lower lows AND we get a daily close above the 10DMA, then maybe a short term bottom is in place.  Remember, we’re only talking about a Short Term bottom.  It is VERY UNLIKELY that the first bottom will be the final bottom of this Bear Market…

Have a great week!

Jerry