Weekly Update: 24 May 2020

A low volume Friday closed out a strong week for the TSP stock funds.  For the week the C fund was up 3.2%, S fund up 6.85%, I fund up 3.25%, and F fund up 0.35%.  This week we’ll look at the 12 year monthly chart of the C fund to put the current rally into perspective.  We’ll also look at 5 month daily charts of the 3 stock funds and the F fund. 

Very Long Term

Look at the 2009 low in the chart below.  This low was the bottom of a 15 month decline and a 55% drop in the price of the C fund.  To be expected, there was a HUGE move higher following this bottom.  During the first monthly move higher off the low, the S&P500 traded 130 Billion shares!  That’s A LOT of volume!  Compare that to the monthly volume in April 2020 where only about 65 Billion shares traded.  From a Volume comparison, the current rally is not that impressive. 

The chart is in Logarithmic scale so, the length of each monthly price candle stick is equivalent on a percentage basis.  The length of the first monthly candle stick following the low in 2009 is significantly shorter than the April 2020 candle stick.  This means that we saw a much bigger price move in 2020 versus 2009, on about one half of the volume!   We are just not seeing the level of conviction buying into this rally that we saw after the lows in 2009.     

Short Term

Shifting time-frames, the TSP stock funds are looking pretty strong in the short term.  The C fund popped on Monday, gaping up through its 10 Day Moving Average (DMA) and recovering all of the prior week’s losses.  It then consolidated for the remainder of the week.  The price is now being supported by the 10DMA and needs to break up and through its 200DMA (Green Line).  IF this happens, we could see the C fund make a run to prior highs of 3400. 

The S fund chart is similar to the C fund.  The S fund gaped up through its 10DMA on Monday, then drifted higher throughout the week.  Importantly, the S fund closed the week above the 1300 level.  It can move over 4% higher before hitting resistance at its 200DMA.

The I fund has been the worst performing of the TSP stock funds.  The I fund was not able to close above resistance at 58 and has rolled over to support at its 10DMA.  While the 3 TSP fund charts look similar, the I fund has significantly under performed both the C and S funds throughout 2020.

The F fund chart looks very strong.  Following a 5 week consolidation along its 10DMA, the F fund broke to the upside on Wednesday of this week.  To be sure, the F fund is not as exciting as the C,S, and I funds.  However, the F fund is much less volatile than the stock funds and can be a great alternative to the G fund.

Bottom Line: While the long term direction is still extremely suspect, the short term trend continues higher.  We want to see the S&P500 (C fund) get above its 200DMA before putting more capital to work in the stock funds.  At this point, stock fund prices are fighting the expectation of this being a “recovery rally” and Seasonality; the “Sell in May and Go Away” effect.  

We will be doing a deep dive into Seasonality in the Weekly Update Show this Sunday night at 6:30pm EST.  Tune in on the FaceBook page at www.facebook.com/GrowMyThriftSavingsPlan.  

Have a great week Memorial Day Weekend..  Till Valhalla!

Jerry