Sunday Update: 29 September 2019

It was a rough week on Wall Street.  The second consecutive week of lower prices for the TSP stock funds.  For the week the C fund was down 1.01%, S fund down 2.30%, and the I fund down 0.90%.  We have focused on the long term charts for the past several months.  This week we are focusing on the short term (daily) charts after a close look at the MACD indicator.

MACD (Moving Average Convergence/Divergence Oscillator) 

The MACD is a primary technical indicator we use at GrowMyThriftSavingsPlan.  It is one of the simplest and most effective momentum indicators available.  Momentum is defined as the rate of acceleration/deceleration of the fund price.  A decrease in Momentum is a signal that price direction is getting ready to pause or reverse.  This is one tool we can use to gauge market risk.  The MACD is a graphic display of Momentum, combining the 26 day, 12 day and 9 day moving averages, to display the strength of a fund’s price movement over time.  (Click here for an in-depth look at MACD).  

On the chart, when the MACD line (black) is above its signal line (red) then prices are moving higher.  When the MACD line is below its signal line, prices are moving lower.  When the MACD line crosses the signal line, in either direction, it is an early indicator of a potential trend change in the price of the fund.  The Histogram (blue) that oscillates along the zero line indicates the strength of the price move.  

Used in combination with the RSI (Relative Strength Index), the 50DMA and the 200DMA, we can get a good picture of the strength of the price trend over time.  Take a look at the MACD indicator on each of the daily TSP stock fund charts below and try to get an idea of the strength of price moves at different junctures.  Look at the histogram at market tops and bottoms.  See if you can anticipate price movement based on the indicators.  

Short Term

The 2 year daily chart below shows the C fund at an important juncture.  On a daily basis, the C fund rolled over last week before making a new all-time high.  At the low of trading on Friday the C fund had filled the gap through the support/resistance line from 05 August, finding near term support at the intersection of the support/resistance line and the 50DMA line.  Given the technical indicators moving lower and the relatively high negative volume last week, I would not expect the support to hold.  The next support level is approximately 2950, the intersection of the prior lows and the 200DMA.

The S fund appears to be breaking down but is still within the Diamond consolidation pattern that we discussed last week.  The S fund closed the week below its 50DMA with a daily low very close to its 200DMA.  The pattern is not yet complete but, it’s very tough to be optimistic about this chart.  The 200DMA is the next area of potential support but the 1325 low is really the key.  1325 is the last support level before the prior low of December 2018.  

On a daily basis, the I fund is in a bit of “no man’s land” right now.  While the C and S funds are close to support levels and moving average lines, the I fund is a little over 1% above its 50DMA.  Based on the look of the technical indicators, I expect the I fund will continue lower and, at a minimum, test its 50DMA.

Bottom Line:  

On a daily basis, these charts do not inspire confidence.  The RSI and MACD of all 3 stock funds are headed lower with the Histograms having just turned negative.  In addition, all 3 stock fund charts now have a negatively sloping 50DMA.  This is not a good sign.  Look at the charts again and see what happened the last time the 50DMA crossed down thru the 200DMA…

Have a great week!

Jerry