Sunday Update: 23 December 2018

The TSP stock funds took another pounding!  For the week the C fund was down 7.05%, S fund down 8.03%, and the I fund down 3.77%... In fact, this was the worst week for the stock market in the past 10 years!  That’s bad but here’s a more frightening stat from the same article.  This has been the worse December performance on the stock market since The Great Depression in 1931!… Very scary stuff.  It’s worth reading the entire article.  

Having said that, we’re going to put things into perspective using the first chart below.  Then we’ll take a look at support levels where we MIGHT see at least a short term bottom.  

C Fund In Perspective

The 12 year chart of the C fund below is logarithmic.  The right side (price) moves up in 200 point increments with the distance between increments decreasing.  Each 200 point section becomes less valuable on a percentage basis as you move up the chart.  So far this month the S&P500 (C Fund) has fallen almost 400 points, from 2800 to 2400, over 14%.  That’s bad but, the same 400 point drop in 2008, from 1400 to 1000, represented almost a 29% decline!  Logarithmic charts are great for getting a visual of gains/losses on a percentage basis over time.  So, while things on Wall Street are pretty bad, they aren’t quite as bad as the headlines make it seem…

Another take-away from this chart is VOLUME (the chart along the X axis).  Volume is the chart of the number of shares that change hands.  Black lines are volume on an up month in price, while red lines are volume on a down month.  From 2007-2009 volume increased dramatically as prices collapsed.  We’re not seeing anywhere near that level of volume in the current market..yet.

Potential Short Term Bottom

At some point this free fall will come to an end, or at least pause.  No one has a crystal ball but technical analysis tools, pattern recognition, trend lines, and Fibonacci retracement levels all combine to give us an idea of where bottoms/tops are likely.  The next 2 charts are 10 year weekly.  Weekly charts are relatively short term at this point, and represent the next most likely areas of support.   

The chart below shows the price level of the C fund with respect to its 10 year trend line.  The trend line is long term support, acting as a floor for prices.  The longer the trend, the stronger the “floor”.  The floor may not hold this time but, we should expect to see at least some support at this level.

The next chart shows the 50 week (blue) and 200 week (red) moving averages for the C fund.  The 200WMA is roughly at the same level as the 10 year trend line in the chart above.  This is further evidence of likely support at this level, 2350-2400.  

The last chart is 11 years MONTHLY.  Monthly charts are not as precise as weekly and daily charts when making reallocation decisions.  However, monthly charts are great for gaining long term perspective.  One of the best tools in forecasting likely support/reversal points in Fibonacci Retracement Levels.  The most common retracement levels are 38%, 50% and 62%.  If we overlay fibonacci on the bull market chart from 2009 thru 2018 we get retracement targets of 2067, 1800 and 1532.  The final bottom, which could take us into 2020, will likely be one of these levels.  

Bottom line is, we are no where near the long term end of this bear market.  Having said that, there will be opportunities along the way to capitalize on short term recoveries.  Most importantly, when the final bottom is confirmed you want to be able to identify it and load up on the stock funds!  Hope, Fear, and Water Cooler Talk are NOT valuable when making TSP decisions.  Hopefully this post alleviated some of the fear and gave you some guard rails for going forward.  

I’m currently sitting at 100% G fund and have 2 moves remaining in December.  If you want to know when I’m moving back into the stock funds, sign up and become a member of the site by hitting the green link on the right.  

If you’ve read this far you probably need a break from the doom and gloom!  It’s the weekend before Christmas so go enjoy it!  

Merry Christmas!

Jerry