Sunday Update: 29 March 2020

What a difference a week can make!  After 5 consecutive weeks of market collapse, we finally saw a short term market bottom.  Will this be THE bottom??…  I spent all day Saturday listening to the Chart Summit 2020 webinar hosted by All Star Charts.  Imagine listening all day to 30 or so of the best technical analysts in the world!  It was a GREAT webinar!  I learned a lot and NO ONE gave a definitive answer that question!  (The majority opinion is that we will see lower lows.)  Fortunately for us, as TSP investors, we don’t need to know if the bottom is in.  We just need to listen to the market and do what it tells us… For the week the C fund was up 10.26%, S fund up 13.54%, I fund up 12.35%, and F fund up 5.03%.  

Long Term

There are 2 questions we need to grapple with in this market.  The first is the long term question of the final bottom in this Bear Market.  The second is the short term question of the recovery rally that we experienced this week.

The long term chart of the C fund below shows the Fibonacci retracement levels off the 2009 lows.  The 50% retracement level is historically the most common reversal area.  Here the 50% level corresponds with the highs of the 2015-2016 correction; increasing the likelihood of support.  We will only know in hindsight but, 2100 will be an important level if we get that low…   

Clearly we are not dropping to the bottom in a straight line.  We are currently in the middle of the biggest relief rally since the lows of The Great Depression!  How much longer this rally can go is the focus of the short term charts below.

Short Term

This week was the first time the market strung 3 positive days in a row since back in February.  It was an EXTREMELY strong 3 day rally, retracing almost 38% of the losses since the Feb high.  This is CLASSIC Bear Market behavior.  Huge price swings will continue in both directions.  We need to see 2 things happen to have confidence that this rally will go higher.  First, we need to see a higher low.  As the market pulls back off of this rally, we want to see the price stay above 2200.  Second, we want to see the 10DMA start to curve upward.  If the price remains above the 10DMA then the line will curve up, strengthening the new rally.

All three of the short term stock fund charts look similar but, the S and I charts have important gaps.  A gap is when the price opens significantly higher or lower than the previous days close.  Often times, gaps are filled and then the price reverses.  In the case of the S and I funds below, if the price raises to the 38% retracement level, it would fill the first gap.  We will watch the gaps closely as the recovery rally continues…

Bottom Line: We are most likely in a Bear Market recovery rally.  It is possible that we have seen the final lows but, I wouldn’t bet on it…  Watch the 10DMA closely.  Being in the stock funds when the price is below the 10DMA is very risky right now…

Have a great week!

Jerry