What appeared to be a constructive week for the TSP stock funds completely fell apart on Friday… For the week the C fund was down 1.44%, the S fund down 1.63%, and the I fund down 0.47%.
This week we’re going to look at the C fund from a short term, medium term, and long term perspective. Understanding where we are from each of these perspectives is critical for making informed TSP reallocation decisions. The short term (daily) chart gives us insight into the ceiling that is currently pushing down on the C fund. The medium term (weekly) chart shows the next POSSIBLE support level. Finally, the long term (monthly) chart shows the next support level if the weekly support fails.
The 3 month, daily chart of the S&P500 (C fund) shows a horizontal consolidation since early August. The C fund has been moving in a range between 2825 and 2945. The upper limit has been clearly defined by the 50DMA while the lower limit has been intra-day lows at 2825. Since prices began falling in late July, volume on down days has been high while volume on up days has decreased as prices approached resistance at the 50DMA. With the technical indicators rolling over, Friday’s big decline is likely the beginning of a push lower from here.
On a weekly basis, the C fund is still holding above its 50WMA. This is a significant support level as we discussed in the 11 August Sunday Update. The C fund found support at its 50WMA in March 2019 and again in June. The best possible scenario is that support at the 50WMA line holds. Because the 50WMA line is beginning to turn down and the technical indicators are continuing to roll over, I am not optimistic that support will hold for long…
On a long term basis, the 50MMA (Monthly Moving Average) has provided support in late 2011, early 2016, and in late 2018. The C fund would have to lose approximately 14% of its value from this point to test the 50MMA. IF we get that low, and the 50MMA does not provide support, then the 10 year long bull market is in jeopardy.
Bottom Line: All indications are that prices continue lower from current levels. The 2 most important numbers to watch are the 50WMA at approximately 2800, and the June low of 2725. If prices fall below these levels, the next support is the 200WMA at about 2500… We are just beginning what has historically been the most difficult time of the year for the stock market. Expect wild price swings in both directions.
Have a great week!