Current Allocations: 50% C Fund, 50% G Fund
It was an erratic week for the TSP stock funds. All three funds gapped up on Monday but had erased virtually all of those gains by the closing bell on Friday. We’ve had 3 full weeks of very tight price movement on a weekly basis, with the MACD/Divergence indicators drifting lower and the RSI staying elevated. The Bulls and Bears are in a serious struggle. In the short term the bulls still have the advantage. Odds are that the market continues to tick up a bit higher. In the longer run, the steam is quickly running out of this rally. It’s just a matter of time (weeks or less) until we see a correction. The big question is, will the next correction be an opportunity to buy the dip or are we in for a longer, deeper correction… Once the correction begins, the 50 and 200 Day Moving Average (DMA) will really help in determining when to potentially get back in. For the time being, 50%C and 50% G allows us to get half of the moves up while managing the downside risk.
In the short term, the nod still goes to the bulls. As messy as this chart is, a final move up to around 2500 is still a possibility in the short term. Since the S&P500 (C fund) hit 2450 in the beginning of June, prices have been erratic and directionless, closing at 2438 this week. This is not the type of consolidation that sets up a strong move higher. On the downside, 2400 is the first real area to watch. The 50DMA is just above 2400 which is also the last significant area of support on the chart.
The long term chart of all 3 TSP stock funds are looking relatively weak. All 3 have been effectively stalling for the past 3 weeks. There is a big difference between stalling momentum and constructive consolidation that sets up moves higher. Again, there is still room for upside over the next few weeks but it’s definitely getting risky.
The C and S fund price charts continue to look similar as do their respective technical indicators. Both have been basically flat for the past 3 weeks while their MACD indicators topped out at the March high. RSI remains elevated on both charts.
The I fund chart is quite different but appears to be topping out as well. The price chart hasn’t had a meaningful correction since its breakout following the 2016 election. With the price looking toppy, the technical indicators high and appearing to be rolling over, and the RSI at extreme levels, the I fund looks ripe for a significant correction.
I’m starting to sound like a broken record but, all we can do is respond to what the 3 TSP stock funds dish up. Here’s some food for thought. If you are still fully invested in the stock funds, you are basically flat for the past 3 weeks but you are 100% at risk. If you are 50%C and 50%G you are also basically flat for the past 3 weeks BUT, you are only 50% at risk if the market falls quickly. This is a great example of TSP account management. The goal is to capitalize on as much of the gain as possible with the least amount of risk to the money in your account.
Have a great week and please share!