TSP Weekly Newsletter: 30 April 2023


What looked like relatively small price changes this week actually masks some important action going on behind the scenes! For the week the C fund finished up 0.87%, S fund down 1.09%, I fund down 0.01%, and F fund up 0.80%.

I was fortunate to spend most of this week at the CMT 50th Anniversary Symposium in New York City. The CMT (Chartered Market Technician) Association is the world governing body of Technical Analysts. After three days of presentations, awards and networking with the best technical analysts in the world, my head is still spinning! I’ll get my thoughts together for next weekend’s Podcast and Newsletter…

In the mean time, market action this week gives us plenty to discuss! It was an extremely volatile week where the C fund gave us a sell signal on Tuesday then came very close to a buy signal on Friday! We have a lot to discuss. Since it’s the end of the month, let’s start with Monthly charts and work our way down to Daily charts.

Below is a monthly chart of the C fund going back to the beginning of 2021. The two horizontal lines represent a resistance channel that has been in place for the past 12 months. With April’s close, that resistance is now cleared. Going forward, on a monthly closing basis, we want to see price stay above the lower resistance band at 4080. RSI is above 50 but MACD has not yet crossed positive. We do not yet have a buy trigger on a monthly basis.

On a weekly basis, the C fund put in a buy trigger during the last week of March. Since then, RSI and MACD have improved but only modestly. We want to see more of an acceleration to the upside in these indicators. Price is getting ready to bump up against some serious resistance at 4200!

On the plus side, this week’s reversal candle found support close to the 20WMA line. The reversal is definitely bullish. We’ll see if this is enough to propel price above the 4200 level.

The daily chart is interesting. The C fund gained almost 10% in January, lost all of those gains from early February to March 13, and recovered almost all of the gains as of April’s close.

We got a clear sell trigger on Tuesday of this week with price closing well below the 20DMA, RSI below 50 and MACD negative. By Thursday, that sell trigger had reversed as price re-took the 20DMA line. Price closed Friday at a new relative high but RSI is still below its prior high. This does NOT yet count as divergence! If price rolls over next week with RSI failing to make new highs, then we have new negative divergence.

One final observation about the C fund this week. It’s an important one! The daily chart below goes back to the beginning of 2021. This week, price broke down below the 20DMA and recovered to new relative highs in 3 days. We didn’t see that once in 2022 BUT, we saw it frequently in 2021… What was 2021? A Bull Market!

While the C fund is definitely giving us reasons to be bullish, the S fund is not keeping up. This is a very weak chart! There are 2 possibilities for the S fund. Either price is forming a horizontal channel, indicated by the dashed lines, or price is forming a head & shoulders topping pattern. Either way, the S fund looks to be on its way to testing its October 2022 lows.

The problem is that IF the October 2022 bottom was the low of this bear market, the S fund (small cap tech) should be LEADING us higher. That is clearly not happening.

The I fund is holding strong. It’s mid-March buy trigger is still in place but, we’ve seen about 2 weeks of consolidation to the 20DMA line. We also have decreasing RSI, and MACD has crossed negative. The I fund could easily give us a sell trigger this coming week.

As has been the case for months at this point, the F fund is the wild card! Price is in an expanding triangle; one of the worst possible chart patterns! RSI and MACD are both making lower highs which indicates weakness in the price trend. While the vast majority of analysts are calling for bonds to rally, we are NOT seeing it in the chart YET…

Bottom Line

There are absolutely reasons to be bullish! The rally on Thursday and Friday this week looked much more like price action in the Bull Market of 2021 than the Bear Market of 2022! The C fund, on all 3 time frames, looks very strong. If the C fund takes out the August high at 4300, it’s game on!

From the bearish perspective, if this is really the beginning of a new Bull Market, the S fund should be leading the way. This is clearly NOT happening. We could talk about sector rotation, the effect of higher interest rates, etc but the bottom line is that new bull markets begin with a rally in small cap stocks; the S fund. They are breaking down, not rallying.

01 May begins what is historically the worst 6 months of the year for stocks. We have an FOMC meeting next week with an expected 25 basis point hike in interest rates. Anything other than a 25 basis point hike would generate a tremendous amount of speculation and volatility in the market. We WANT to see price pull back in May and June. This would give us a great potential buying opportunity going into Q4 of this year.

If you’re not riding this summer out in the G fund then stay alert! It’s going to be exciting!

Have a great week!

The Grow My TSP Team

Responses

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    1. It’s possible but very unlikely. The S fund needs to participate more in this rally if it’s going to get real.