Weekly Update: 20 September 2020

It was a big reversal week for the market.  The C fund closed below its 50DMA (Day Moving Average) but, all the news was not bad…  For the week the C fund was down 0.64%, S fund up 2.85%, I fund up 0.51% and F fund down 0.13%

This week we will take a look at the Fear And Greed Index and see how the readings have changed since the last time we looked at this index in the 30 August Weekly Update.  We’ll also look at the 9 month daily charts of all 3 TSP stock funds.

Fear & Greed is currently “Neutral”.  It’s most recent high in late August was 79 (Extreme Greed).  That is consistent with the C fund drop of about 7% from the early September high to present.  While the index has come down off of its high, it is not yet in the fear range.  This would be one data point leading us to expect further short term price decline.

The Fear & Greed index over time is also consistent with an expectation of continued price decline.  You can see from the chart below that, once the indicator tops out near 80, it usually falls back to near 20 at the bottom.  We should expect a fear reading of near 20 before this correction is over.

The 9 month daily chart of the C fund below does not look good but, it’s not all bad either.  While it did close below its 50DMA (red line) on Friday, it did not close at the low for the day.  Price found support at 3300 and bounced higher.  The 3300 level should provide support.  A close below 3300 would pretty much be the end of any possible rally from here.  The 10DMA (blue) crossing down thru the 50DMA (red) would also be a giant red flag but, we aren’t quite there yet…

The S fund chart looks stronger than the C fund, having closed back above both it’s 10DMA and 50DMA lines.  As of now, the S fund has been supported by the 1500 level that was prior resistance.  1500 is a very strong support level!  A close below 1500 would be a serious problem for the S fund.

The I fund is still in its horizontal consolidation that began after its breakout day in early August.  Since then, the I fund has consolidated sideways between 64 and 66.  It is also staying above its 10DMA.  The I fund chart is the best of the 3 charts right now but, until it gives us a strong move in one direction or the other, I would not be buying or selling the I fund.

Bottom Line: If you are contemplating a reallocation, there are 2 things to keep in mind.  First, the market has not given us a clear direction for moving forward.  Yes, the C fund closed below its 50DMA but, it is not collapsing.  Additionally, the S and I funds seem to have found support at their respective support and moving average lines.  Secondly, it comes down to your personal risk tolerance.  If you are concerned about the upcoming election, there is nothing wrong with moving all or some to the G fund to lock in your current TSP account value.  If you are more risk tolerant, you could give it another day or two and see if the support levels hold.  There is risk either way…

Have a great week!

Jerry