We ended July with a volatile week but, the 6th consecutive month of new highs for the S&P500 (C fund). For the week the C fund finished down 0.37%, S fund down 0.03%, I fund up 0.34%, and the F fund up 0.22%.

This week we’ll take a look at comparative seasonality charts. You can get these WITHOUT a paid subscription from StockCharts.com. The first chart shows us the % of months in which C fund closed higher than it opened over the past 10 years. The next 3 charts compare the C fund to each of the other core TSP funds, showing us the % of months in which the C fund out-performed.

Finally, we have the 1 year daily chart of the C fund and the 6 month daily charts of the remaining core TSP funds.

Seasonality

Looking at Seasonality Charts is a great tool to utilize at the beginning of each month. While the charts use historical data and do not take into account current market conditions, they are useful in creating a bullish or bearish bias for the month. For example, in the chart below we see that the C fund finished higher every November for the past 10 years! This does NOT mean that the C fund will finish higher every November. All things being equal, if I needed to make a reallocation decision in November, I would tend to stay in the stock funds. Having said that, all things are never equal… Seasonality is a great place to start for the month but it’s not the only tool in the tool box.

In terms of the C fund for the next several months, August thru October have consistently been among the worst performing months for the past 10 years. Again, this is statistical data and does not take into account current market conditions. Using this as a basis, I would tend to reallocate out of the stock funds faster than I would in November.

The other way that we can use these charts is to compare each core fund to the C fund over the same 10 year period. This gives us a basis when determining our allocations for a given month. For example, the chart below is the C fund compared to the S fund. The C fund out-performed the S fund 70% of the time in April over the past 10 years. When we look at August, the S fund out-performed the C fund almost 80% of the time over the past 10 years. If the charts have us in the stock funds in August, I would likely be heavier weighted S fund vs C fund.

The C fund out-performed the I fund in August 67% of the time over the past 10 years. Then, the very next month, the I fund out-performs the C fund 78% of the time in September… Remember that these are monthly snap shots. The best way to utilize this data is to apply it to the charts in real-time. If I was overweight C fund vs I fund in August, I’d be looking to move from C to I at an August high in the C fund. Ideally late in the month.

We know volatility on the stock funds is high from August thru October. Therefore, the chart below makes sense. The C fund outperformed the F fund only 56% of the time in August thru October over the past 10 years. If you don’t want to deal with this level of volatility, the F fund is frequently a good place to be during these months.

The TSP Fund Charts

The C fund is consolidating, following a run to new highs from the recent test of the 50DMA. With a relatively low volume down week, we don’t see institutional selling. The chart is giving us no reason for concern right now. A clear upturn on the Silver Cross Index indicator is a bullish sign.

2 negative reversal days for the S fund is not what we want to see. Having said that, as long as price finds support at the 10 and 50DMA lines, the S fund is in good shape.

The I fund has broken up thru a short term resistance line. We want to see that line become support on any further weakness in the I fund. The technical indicators look good, giving us no reason to sell the I fund at this point.

The F fund continues to ride its 10DMA higher. As long as interest rates continue to fall, the F fund will continue higher. The key here is to watch inflation and the response by the FED. IF/When the FED stops pouring money into the system, the F fund will roll over. What you’re listening for is the term “FED Tightening”. IF/When the FED tightens, rates will rise and the price of the F fund will fall.

Bottom Line

There is a ton of fear around CoVid and the Delta variant right now. An increase in transmission, whether vaccinated or not, could lead to further stress on the economy if shutdowns return. It’s certainly on everyone’s radar. Will this impact the stock market and our TSP? We don’t have a crystal ball but, we will respond as necessary when the market tells us.

Have a great week!

Jerry