Volatility made a comeback this week as all three TSP stock funds closed lower.  For the week the C fund was down 0.89%, the S fund was down 0.23%, and the I fund was down 1.22%.  

Rather than separate the long term outlook from the short term, we’re going to keep the long/short charts for each fund together this week.  This change in perspective will hopefully give us a better view of how they inter-relate.

C Fund

For the C fund, what do we see on the 6 month daily chart and how does it relate to the longer 2 year weekly chart below it?  The C fund hit resistance as it closed in on the 2800 level.  On a daily basis, it has rolled over and found some support at 2750.  Where 2750 was acting as a ceiling for prices in May, that same price level is acting as a “floor” or support for the price chart now.    The RSI is a leading indicator right now.  It got to a high of almost 70 before rolling over on 12 June, where the MACD and Stochastic didn’t cross into negative territory until 19 June.  Continued support at 2750 would be ideal.  Any close below 2675 would be a game changer.

The long term has fewer moving parts.  You can really see the importance of the 2700 level on the 2 year weekly chart where the trend line intersects the price chart.  2700 is really the key on this chart.  A weekly close below the trend line (2700) would be a problem.  The weekly MACD/ Stochastic and RSI appear to be rolling over.  

So, the long term chart number to watch is 2700 and the short term number is 2675.  How do these inter-relate?  A weekly close below 2675 would violate the 2 year trend line which is significant.  In addition, the 200DMA will be at or near 2675 by next week. A close below this level on a daily basis would be a serious problem for the chart pattern.  

S Fund

The S fund had a pretty volatile week on a daily basis.  Thursday’s drop took out the gains from the previous 7 trading days.  1440 is some obvious support on a daily basis.  A close below this level sets us up for a retest of the 50DMA at 1400 (about 3.5% lower than current levels).  The technical indicators have turned negative on a daily basis.

On a weekly basis, the S fund gave us a negative weekly reversal.  A negative reversal on a weekly basis is never a good sign…  In the big scheme of things, as long as the S fund continues to find support at its 2 year trend line, we’re in good shape but, that trend line is about 5% below current levels.  I would not be willing to absorb those losses if I were invested in the S fund.

How do they relate?  Here’s one way to use both time frames to make a possible trading decision.  We have support at 1440 on a daily basis.  If we lose the 1440 level, support is not likely until the 50DMA at 1400 which is also the area of the long term trend line.  We also have a negative weekly reversal pattern (not good).  One possibility is to sell the S fund if we get a close below 1440 and buy back when it hits 1400.  This takes into account info gleaned from both the long and short charts.  Another possibility is to sell the S fund now.  Since the bias is that the S moves lower from here, selling the S fund now is a great risk management strategy.  You would look to buy it back at the 1400 level or above 1460 if it never fell below 1440.

I Fund

The I fund hit a low this week as the RSI bounced off the 30 level.  30 on the RSI has indicated a short term bottom consistently throughout 2018!  That’s great info to have if we could trade daily within the TSP.  Unfortunately, with the 2 trade per month rule, set ups like this don’t help us much.  In the short term, it looks like the I fund is moving back up within the horizontal channel.  Technical indicators are moving up with the next resistance at the 200DMA and 50DMA.  

While the short term chart isn’t bad, the long term I fund chart does not look good.  The lower channel line on the daily chart is also a significant floor level on the weekly chart.  While the daily indicators have turned up, the weekly indicators are negative and headed lower.  

How do the 2 charts relate?  I would expect some serious resistance at the 200DMA and/or 50DMA followed by a likely roll over to test the lower channel line.  On a weekly basis, a close below that floor at 66.50 is a big problem…

This is NOT an exact science so don’t get fixated on the specific numbers.  The goal is to observe the chart patterns and technical indicators, over multiple time frames, to  help us make the most educated decisions possible.  When market risk is low, let it ride in the stock funds.  When market risk is high, manage that risk utilizing the G fund.  

We’ve got an interesting summer ahead so stay tuned…  Have a great week!

Jerry