Weekly Update: 27 September 2020

It was another wild ride for the TSP stock funds!  Following 2 negative reversals, the C fund gave us a positive reversal this week, closing at the top of the week’s trading range.  It was certainly a bit of relief following 3 consecutive down weeks.  The C fund finished slightly negative but, it could have been much worse…  For the week the C fund was down 0.63%, S fund down 1.84%, I fund down 3.15%, and F fund down 0.08%.

Long Term

Below is the 6 year weekly chart of the C fund.  Using a weekly chart vs a daily chart gives us a better perspective over a longer time period like 6 years.  The blue 10WMA (Weekly Moving Average) line corresponds to the 50DMA in terms of price.  The red 40WMA corresponds to the 200DMA in terms of price.  There are a ton of insights that can be gleaned from this chart!  Here are my top 3:

1. Every test of the 40WMA has been successful since mid-2016 EXCEPT twice.  The 2 failures were in October 2018 and February 2020.  When price gets down to the 40WMA this time, will we see support?
2. In the 2 cases where support did not hold, the 10WMA crossed down thru the 40WMA and price continued significantly lower.  2 examples of the “Death Cross”.
3. Every time price breaks down thru the 10WMA, it continues down to the 40WMA. 

Bottom Line, I would expect the S&P500 (C fund) price to fall to the 40WMA at/around 3100.  If we see support at that level, great.  If no support, prices can go MUCH lower…

Short Term

The 9 month daily chart of the C fund below shows us closing prices only.  While Candle Sticks give us a TON of information, a chart with only the closing price really highlights support and resistance at the moving average lines.  

In the chart below you can see where the 10DMA line failed, found support at the 50DMA but then the 10DMA became resistance.  Ultimately the 50MDA failed as well.  Now, both the 50DMA and 10DMA are acting as overhead resistance to price advance.

The S fund chart is holding up a bit better, having closed Friday above the support line that began at the high back in June.  The 10DMA has turned slightly positive along with the technical indicators; all good signs for the S fund.  A close above 1550 would be a HUGE step in the right direction…

The I fund is not looking good… It began the week with a huge gap down on Monday and things only got worse.  Friday’s recovery helped some but, the bullish base on base pattern that we have been following has clearly failed at this point.  

Bottom Line:  This market does not inspire confidence in the short term.  The best case scenario is that the C fund finds support at its 200DMA; about 6% lower than Friday’s closing price.  While it is POSSIBLE that the C fund could find support and move higher without first hitting its 200MDA, a look at the first chart in this post shows that’s very unlikely… On the positive side, once price does hit the 200DMA, it USUALLY rallies higher from that level.  

It’s an exciting time to be a technical analyst!  Have a great week!

Jerry