Weekly Update: 04 October 2020
The resiliency of this market is truly amazing! The substantial follow-thru day, ON BIG VOLUME, on Wednesday was great. Then the positive reversal day on Friday following the news that the President had contracted CoVid, showed the incredible strength of this market. If you’ve been following the Weekly Update for any amount of time, you know that I avoid any predicting (crystal ball) and I don’t ask “Why”… I simply respond to the market. However, lately, I have been more interested in the WHY… Why, with all the social unrest, CoVid, Supreme Court, Presidential Election,… on and on… Why is the market not rolling over?? If I find out the answer, I’ll let you know. In the mean time…
For the week the C fund was up 1.51%, S fund up 3.99%, I fund up 1.28%, and F fund down 0.02%.
The 9 month chart of the C fund below shows the market working to reclaim its 50 Day Moving Average (DMA). This is the first period where the C fund has been below its 50DMA since regaining it back in April. Last week we showed a longer term chart where, each time the C fund broke down below its 50DMA, it ALWAYS continued down to its 200DMA. With that in mind, we should not be surprised to see the market move lower over the next several weeks. Having said that, I would not be selling the C fund while it remains above its 10DMA.
The 3 month daily chart of the C fund below shows how to use technical analysis to buy back into the stock funds as close to the bottom as possible with the least amount of risk that the market will go against you. On 28 October, the price gapped up thru the 10DMA and closed right on the 50DMA. The ONLY problem was the light volume. On a price jump like this, especially off of a bottom, we need to see volume higher than the previous day to be sure that institutional money is onboard and buying the new rally. We got that on 30 September where the price move was not as spectacular but volume was excellent. Buying on a follow-thru day on big volume dramatically increases the odds that prices continue higher AND reduces the risk of the market rolling over. Friday’s news of the President contracting CoVid understandably added some pressure but, price stayed above the 10MDA. We’re still in good shape for now.
The S fund chart looks very strong. While the price opened down on Friday following the news, by the end of the day price had recovered almost back to Thursday’s high. This shows significant market strength.
The I fund is having a tough time right now. It gapped down below the support/resistance line back in mid-September and is struggling to get back above it. With a down trending 10DMA line, the I fund is the worst of the 3 TSP stock fund charts right now.
Bottom Line: I am holding what I have. The C fund seems to have found support at its upward trending 10DMA. The S fund is poised for a move higher after a strong reversal off of its 10DMA on Friday. As of this writing, I am holding what I have. HOWEVER, if the President’s condition were to worsen, things could change in a hurry…
Have a great week!
Last week you stated if we close below 50 day you’d consider going back to 100 g. This past Friday we did close below 50 day but above 10 day. Also s fund looks good. In a nut shell why hang on when we dropped below 50 ?