Weekly Update: 30 August 2020

A monster week for the TSP stock funds!  The C fund had the biggest price move since late June.  For the week the C fund was up 3.26%, S fund up 2.62%, I fund up 1.65%, and F fund down 0.48%.  This is both a Good News and Bad News story…  We will explain using the 2 year weekly chart of the C fund and the CNN Money Fear & Greed Index.   We’ll finish up with a look at the 6 month daily charts.

The Good and the Bad…

The 2 year weekly chart of the C fund below shows a huge move higher this week as the price exploded past its February 2020 high.  The C fund has now firmly established a new All-Time High and the previous high of 3400 should act as support in the future.  I would have preferred to see this kind of price move happen on bigger volume but, given the time of year and how far price has already come, volume was pretty impressive.  This is a solid statement that the market is not ready to roll over.  The MACD is high but continues higher and the RSI still has room to move up before becoming over-bought.  The trend is clearly UP and nothing in this chart suggests that the trend will change anytime soon…  

Any Now For The Bad News…

While the trend is clearly UP, there are sentiment indicators that we should watch in anticipation of an eventual roll over.  The CNN Fear & Greed Index is not really a timing tool but, it is extremely effective in raising caution flags when the market is either over-bought or over-sold.  This is a “Contrarian Index”, meaning that when the index is high, you should prepare to get out of the market.  When the index is low, you should be getting ready to get back into the market.  What does a reading of Extreme Greed 77 mean??  Take a look at the next chart… 

When we look at the Fear & Greed Index over time, we can see that 80 is a significant number.  MOST of the time, the index rolls over at or near the 80 level.   This IS NOT a price chart.  This is a chart of FEAR and GREED.  (Please go to the Fear & Greed Index page to get a full understanding of what goes into the index!)

When the index hits 80 and then rolls over, it does NOT mean that the C fund price will collapse; but it could… Take a look at the index vs the C fund price in 2019.  The C fund consolidated for several months in 2019 before continuing higher.  In early 2020, on the other hand, the C fund collapsed 34% and hit an absolute Extreme Fear level before bottoming.  

The Daily TSP Stock Fund Charts

The 6 month daily charts of the TSP stock funds below all look very similar.  Each had a strong run off of the March lows, consolidated through June, and continued higher along their 10DMA lines.  Volume has been relatively low as prices have continued higher but, the trend is clearly up.  At some point, this trend will end.  A daily close below the 10DMA would be my line in the sand.  As a point of reference, the C fund is currently about 2.5% above its 10DMA line (blue line)… 

Bottom Line:  The trend is your friend (until it’s not)… The trend is currently UP, no doubt about that.  The question is, how much longer can it continue higher before some type of correction? 

One other important insight from the C fund weekly chart is this.  The C fund currently sits almost 7% above its 10WMA (Week Moving Average).  Price hasn’t been this far extended since the huge weekly move in late May 2020 (See the chart). 

IF you are risk averse, now is an excellent time to take some money off the table.  

Have a great Week!

Jerry