It was another typical week in the life of a Bear Market. For the week the C fund was down 1.27%, S fund down 3.29%, I fund down 7.52%, and the F fund up 0.81%.

If you have been following along with our reallocations, you’ve been protecting your TSP account since the initial collapse on 6 January. If that’s the case, you’re looking for a reason to get back into the stock funds. If you have ridden this correction in the stock funds, you’re looking for a reason to get into the G fund. Either way, you’re looking closely at the 4300ish level on the S&P500. The market is fighting to find support here. If price rallies off of this support level then we’re back in business with the stock funds. If the market loses support at this level, price could fall significantly lower…

Analysis

Last week we posted the C fund chart below to show the difference between a rally on a breakout vs a recovery rally. Rallies on a breakout do not always succeed. Just look at what happened after the late December breakout… USUALLY price moves higher for some time following a breakout from a consolidation. A recovery rally, on the other hand, happens after price gets over sold in the short term. USUALLY price fails to make new highs and rolls over. We identified the end of February rally as a recovery rally. The next chart is updated to this week…

For the week, the C fund was down 1.27%. You can see over the past 6 trading days, the market really trying to hold the line at 4300. Unfortunately, the analysis shows that this level is unlikely to hold. In the last 6 trading days, there were 2 up days and 4 down days. The up days came on volume lighter than the previous day while the down days came on significantly higher volume. We have a down trend line that is weighing on price and should act as resistance on any rally attempt. We also have the RSI line below 50.

It is possible that the bottom was made in late February. Price could put in a V bottom, blast off through the trend line and take us to new highs. It’s possible but, the analysis does not support that possibility at this time.

Here is a chart of the F fund that we posted last week. The F fund had been bouncing off of the 109 level, long term support line, and the 38.2 Fibonacci retracement level, for the past 3 weeks. We identified that this would be an excellent place for at least a short term recovery rally in the F fund. The next chart is updated to this week…

The F fund exploded higher off of this support level. While price retreated some by the end of the week, neither the trend line nor the 109 level have been retested. There is no way to know how this rally attempt will play out. Right now, the risk reward ratio is excellent. If the rally continues, price could get back up to 114 or higher. The rally fails if price closes below the 109 support level.

The TSP Funds

Still the only chart that matters for most TSP investors at this point. Until the C fund can close above its 20 Week Moving Average Line, on a weekly basis, there is no hope for a significant market rally.

The S fund is in a clear down trend. We have consistent lower highs and lower lows sine the November 2021 top. Price needs to put in a higher low, rally above the trend line, and get above the 50 RSI line. Until those 3 things happen, there is no reason to be in the S fund.

The I fund was our last best hope in terms of the stock funds. As we’ve been saying for the past couple of months, the I fund was holding up better than the C and S funds because of its minimal exposure to tech. Since the FED’s announcement to raise rates, high growth tech stocks have taken the brunt of the correction, until this week. The crisis in the Ukraine has expanded the correction beyond tech. This is clearly evident in the I fund losing over 7% of its value this week.

There is no short term pattern to identify in the I fund. We will look at potential support levels on a longer term chart in next weeks Newsletter. For now, there is no reason to be invested in the I fund.

The F fund had a very exciting week. You got the long term, weekly perspective of the F fund above. This is the short term, tactical picture. The F fund collapsed following its flat consolidation from October through December of 2021. Price came down to the long term trend line and the 38.2% Fibonacci retracement level. It then put in a double bottom and exploded higher on the last trading day of February. Positive volume has been increasing significantly since mid-February. It appears that big money is buying into this rally attempt.

On Wednesday price had a huge move to the downside. This was very constructive given the giant move to the upside on Monday and Tuesday. Fortunately, price filled the gap and found support at the down trend line. Positive volume was again high on Thursday and Friday. This is a great chart set-up AND we have a very strong base of support at 109.

Bottom Line

If you’re reading this, hopefully you have been protecting the value of your account, being primarily in the G fund since 6 January. If you’re still in the stock funds, watch the 4300 level on the S&P500 (C Fund). If price breaks down hard through that level, it will likely be the beginning of something serious.

If you’re in the G fund, don’t get too excited to get back into the stock funds. It’s easy to get sucked into recovery rallies. If the 4300ish level holds, and we get a real bullish breakout, we’re back in the stock funds.

For now, the F fund is the only chart with any potential. We know that the F fund is tied extremely closely to the FED’s decisions on interest rates. With competing pressures to both raise and not raise rates, given historic inflation and a potentially expanding war in the Ukraine, the F fund could be extremely volatile for some time. My line in the sand on that reallocation is 109.

Have a great week!

Jerry