Current Allocation: 100% G Fund
It was a choppy week. In the end, all 3 TSP stock funds closed higher than where they began the week but, only the I fund closed higher than last week. We are definitely in the midst of a consolidation that will take more time to play out. I would expect sideways to down movement for the next several weeks as we drift down to the 200DMA (Day Moving Average) on the C Fund Daily chart, and the lower channel line on the C Fund Weekly chart. While I’m anticipating a slow drift lower, it’s possible that we could see more volatility with some big price swings. Whichever way it plays out, we’re looking for the C fund to get down to the 200DMA before dipping back into the stock funds. A close above 2490 will require a re-evaluation.
The C fund 1 year daily chart below shows a nine month up trend line. Since the breakout following the election, each time the C fund paused it bounced up to new highs from this line. Since breaking down below the trend line last week, it is yet to get back above it. Trend lines are a very useful tool, along with moving average lines. They act a floor for the price when the overall trend is up, and as a ceiling on the price when the overall trend is down. While a trend change is not yet confirmed, there is a good bit of resistance at the 2450 level right now.
The C fund 6 month daily chart below is similar to the 1 year chart above but shows the 50 and 200 day moving average lines. Much like the trend line, the 50DMA is acting as a ceiling on the price of the C fund now. Ideally we want to see the price stay below the 50DMA and drift lower to the area of the 200DMA, about 2370 by the end of September. Having said that, the indicators are at relatively low levels on the daily chart so we could see a brief bump in prices next week before the decline continues.
You can really see the symmetry of the price chart, within the longer term channel, in the chart below. The price has remained above the median channel line since the breakout following the election. As the price continues to drift lower, we would expect to see it hit the lower channel line at around 2370 (the same area as the 200DMA). The indicators show a continued drop in price is likely on a weekly basis.
The S fund has seen a more dramatic break in the trend line. After 4 consecutive down weeks beginning with the reversal in July, the S fund made it’s first attempted rally this week. It was a pretty weak attempt… While the S fund finished higher than where it opened, it never got above last week’s price high. The MACD/Stochastic and RSI indicate a possible continuation of the rally into next week.
The up trend is still in place for the I fund but it’s getting shaky… Over the past several weeks, when prices have gone up, they have done so on very weak volume. This means that few few shares are being traded while the price is going up; a sign of weakness. The MACD/Stochastic are rolling over from a pretty elevated level and the RSI is still high. The set up looks like the I fund moves down from here. We’ll see…
The market is looking very shaky. While it has not rolled over and crashed, it is not looking very strong. This is exactly the kind of market we would expect, consolidating before a final run to new highs going into 2018.
Have a great week!