The roller coaster continues… This week we saw price swings reminiscent of 2008! The C fund was down 5.5% for the week before a HUGE reversal on Thursday and Friday. The BIG question, is the bottom finally in??

For the week the C fund finished up 0.82%, S fund up 1.54%, I fund down 0.88%, and F fund down 0.27%.

This week we’ll take a look at the long term and short term charts of all 4 TSP funds. The long term view will help us keep emotions under control while the short term view will help us make tactical reallocation decisions.

The Only Chart That Matters & The Long Term

We put out a short 4 minute video earlier in the week titled The Only Chart That Matters. We talk through the 2 year weekly chart of the C fund and explain the importance of the 20 week moving average line. If you haven’t seen that video, definitely check it out!

Regardless of the huge daily price swings, until the C fund closes above the 20WMA (on a WEEKLY basis) we have no chance of a sustained rally in the stock funds. A close above this line does not guarantee a sustained rally but, it’s the first necessary step. AND, we want to see that close happen as RSI moves up through the 50 line.

Like the C fund, the S fund put in a lower low on an intra-week basis but a higher low on a weekly basis. The S fund also needs to bet back above its 20WMA before a sustained rally is possible.

The I fund is struggling to maintain support at the 75 level. Price certainly looks like it wants to move lower from here… Support above the 20WMA and a positive change in the RSI would be a very encouraging sign for the I fund.

The Fund is trying to find support around the 109 level. As we showed last week, 109 could be a major support level at the 38% Fibonacci retracement and the long term trend line. This would be a great technical level to begin at least a short term recovery rally.

Short Term

In the 6 month chart of the C fund below, we can see the difference between breakouts and recovery rallies. Following the September-October correction, the C fund gapped up from support as the 10DMA as the RSI jumped above the 50 line. This began a sustained rally through mid-November. The late December follow thru ultimately failed but was a great set up.

The recovery rallies that we have seen since the January low have been very short and RSI could not get above the 50 line. The market has been selling the recoveries rather than buying the dips.

Last week we talked about a potential Head & Shoulders topping pattern for the C fund. This week, the C fund clearly broke down through the neckline but rallied the very next day. The market is clearly weak at this level. We could see a recovery rally continue to one of the down trend lines, or as high as 4600, before continuing down. This would be a continuation of the same Head & Shoulders pattern. An impulse move above 4600 would mean that the topping pattern failed.

A very close up view of the C fund shows us a possible impulse wave formation off of Thursday’s intra-day low. Ideally price continues higher this week to complete 5 waves. A 3 wave correction down to around 4350 could be an excellent opportunity to get back into the stock funds.

The S fund is in a long term down trend. First, the S fund needs to get above its down sloping trend line. After that, resistance at the 2100 level is looming… Intra-day lower lows from late January to late February is not a great bottoming pattern. One positive note, RSI put in a higher low than January. This divergence between price movement and RSI could bode well for the S fund.

The I fund has clearly broken down through its long term support level at 75. It will be interesting to see if the I fund can retake the 75 level in a meaningful way before rolling over again. Ultimately, we need to see the 75 level acting as support, not resistance, for a new rally to begin in the I fund.

The F fund just put in a double bottom. If the F fund can rally above 110, we could see a rally up to resistance at 113.0. A sustained rally to new all time highs is very unlikely anytime soon for the F fund.

Bottom Line

Thursday’s reversal followed by Friday’s strong advance has taken the edge off of the fear in the market. As of right now, this can only be labeled as a recovery rally. We have been looking at the 4000 or 3800 level, from a pattern and Fibonacci perspective, for a bottom in the C fund. Thursday’s low of 4120 is not significant in terms of identifying a potential low.

Short term, days to weeks, I am still bearish on the market. Until we get above resistance at the down trend lines or moving average lines, the odds favor lower prices going forward.

In the long term, I am still optimistic that the bull market from the Covid low remains in tact. The next sustained recovery rally will answer that question.

Have a great week!

Jerry