TSP investing requires discipline and a plan. If you are a “Buy & Hold” (passive) investor, the plan is to select funds that meet your personal risk tolerance, and stick with them. It requires the discipline to remain in the funds you selected, regardless of how much the market drops. If you are an active investor, the plan is to make reallocation decisions based on price action, within the context of the TSP rules. Active TSP investing requires the discipline to develop a plan, with multiple guidelines, and stick to it. Passive TSP investing requires us to hold on through the market rollercoaster. Active TSP investing enables us to minimize the big drops in the rollercoaster… With that said, there is always an emotional component. This week was a great example of that!

It was an extremely volatile week for the TSP funds. The weekly closing numbers do not reflect the extent of the price swings but, we will get into that in the daily charts. For the week, the C fund finished down 1.39%, S fund down 2.03%, I fund down 1.06%, and F fund down 0.27%.

The Emotional Rollercoaster of TSP Investing

It was a rollercoaster week for TSP investors! The picture below generally refers to a long term cycle of market emotions but, many of us felt all of these emotions this week… We cannot avoid these emotions BUT, they do not have to drive our TSP investing strategy.

A Long Term Perspective

Technical analysis gives us the ability to look at the market from a near term (daily) perspective as well as a longer term (weekly or monthly) perspective. The daily ups & downs of the market can be gut wrenching but, if we step back a bit, a longer term perspective can help manage our emotions and give us a line in the sand.

The 20 month weekly chart of the C fund show that ALMOST every time price hit the 10WMA (Week Moving Average) line, it got support. We saw support at the 10WMA this week and a nice reversal. Had the C fund closed at the bottom of the week’s trading range, below the 10WMA, you would be reading a much different newsletter… Having found support at the 10WMA and working thru much of April’s gains, the C fund is in a good position to move higher from here. A weekly close below the 10WMA would be a giant red flag.

Daily Charts

We had a breakout to new all-time high last Friday following a relatively flat base since mid-April. The breakout failed dramatically this week but found support at the 50DMA. The late week reversal enabled the C fund to close the week back above its 10DMA. A close back above the 10DMA is certainly bullish BUT… Volume was low on Friday’s big price move higher, and the MACD has not yet crossed to the upside. A positive MACD crossover will really strengthen the sustainability of this rally attempt.

There is a lot going on with the S fund in terms of technical analysis. The S fund is in a very clear horizontal consolidation pattern between 2050 and 2250. We got support at the lower channel line, and a recovery back to the 10DMA this week. The S fund still has a lot of work to do in reclaiming a leadership role with respect to the TSP funds. We need to see a daily price close above both the 10DMA and 50DMA. Ultimately, we need to see a close above the upper channel line to confirm a new up-trend.

Like the C fund, the I fund broke out from a flat base last Friday. It’s breakout also failed, found support at the 50DMA and closed the week above its 10DMA. The long term MACD trend on the I fund us up but, we want to see a positive crossover to solidify this new rally attempt.

There are 2 possibilities for the F fund. A close above 115 would confirm a major rally off of the March lows. A daily close below 113.75 would indicate further weakness ahead. Ultimately, a close below the March low would be a giant red flag; likely signaling a collapse in both the F fund and the stock funds. We will be watching the F fund closely!

Bottom Line

This week’s market action represents one of two possibilities. First, the top could be in and this week was the first shot across the bow. Second, the market could have been working off the froth of the C fund gains through April. If it’s the former, the market will roll over and the C fund will close below its 50DMA/10WMA. If it’s the latter, the C fund will continue on to new All-Time Highs. Those are the guidelines. What you do within the context of those guidelines depends on your personal circumstances and risk tolerance. There is no Crystal Ball…

Have a great week!

Jerry