It was a rough week for the TSP stock funds. By the close on Friday, the C and I funds wiped out all gains made since mid-April, and the S fund pulled back to its early February price level! The obvious question is, will prices continue lower or will we see some support here? We’ll do some chart analysis around this question. For me, the real question is, what is the Market Risk right now and am I willing to accept that level of risk given my personal circumstances and risk tolerance?… For the week, the C fund finished down 1.91%, S fund down 2.55%, I fund down 3.06%, and the F fund up 0.05%.
Before we get to the daily TSP charts, we’re going to get some perspective using a technical analysis tool called “Measured Moves”. This simple tool can help us identify and/or anticipate likely market tops. We’ll also take a look at the Dow Jones Industrial Average ($INDU). While the $INDU is not one of our TSP fund options, it is one of the most followed indexes in the U.S. Right now, the $INDU is leading the overall market lower so, it’s worth taking a look.
A Measured Move is the vertical distance from a significant low to a significant high on the chart. Once a measured move length is established, it tends to repeat throughout the cycle. Below is a 15 year monthly logarithmic chart of the C fund. We use a logarithmic chart to show % changes versus absolute price. Each measured move (vertical line) in the chart below represents the same % price move from a significant low to a significant high. Each time the measured move completes, price rolls over…
Below is a 15 year monthly logarithmic chart of the S fund. You can see measured moves occurring over similar timeframes as the C fund. In each case, once the measured move is complete, price rolls over.
The timing of the measured moves was a bit different on the I fund chart but, the result is the same. Once the measured move is complete, price rolls over.
Measured Moves are just one tool in our kit. Every move higher does not turn out to be a Measured Move but, when you can identify it, measured moves can be a great tool to anticipate significant market tops.
Dow Jones Industrial Average ($INDU)
We go into more detail about the $INDU in the Weekly Update Show this weekend. Check it out on FaceBook or YouTube!.
The Dow Jones Industrial Average is the second oldest index in the U.S. Created in the late 1800s by Charles Dow and Edward Jones, the index attempts to serve as a proxy for the overall U.S. market. The components of the index have changed 60 times over the years in an attempt to reflect the current market. The index currently consists of 30 companies including 3M, Amgen, American Express, Apple, Boeing, Caterpillar, Chevron, Cisco, Coca-Cola,…
Below is a 1 year daily chart of the Dow Jones Industrial Average. Depending on your personal risk tolerance, this chart could be viewed very differently… IF you are risk averse (ie.. a Conservative TSP Investor) here’s where your focus would be:
June’s high was lower than May’s high. Volume was increasing this week as price was decreasing. Price closed significantly below both the 10DMA and the 50DMA. The 10DMA line is just about to cross the 50DMA (Bearish Silver Cross). Most importantly, price closed on Friday below the May lows! If you are a conservative investor, now is certainly time to decrease your exposure to the stock funds.
IF you are a risky TSP investors, here’s what you might see in the chart… This dip below the 50DMA could be short lived, similar to the correction in Sep/Oct 2020. The technical indicators are oversold. When they get to that level, a bottom is usually imminent. If I move to the G fund now, I will lock in losses and not get the rebound… If you are a risk prone TSP investor, you would look to increase your exposure to the stock funds here in anticipation of a market bottom.
The Daily TSP Charts
Price closed below the 50DMA on Friday for the first time since early March. This is a serious red flag! If I were invested in the TSP stock funds, I would consider reallocating (at least partially) to the G fund. The upward trend is still in play for the C fund because we still have higher highs and higher lows. However, given the breakdown in price on the C fund and lower lows on the $INDU, a conservative investor would remove some risk at this point.
The S fund hit its long term upper resistance line last week and immediately rolled over. S fund technical indicators have just crossed negative with plenty of room to go lower. The only positive way to view this chart is with the hope of support at the 50DMA line. IF support holds at the 50DMA level and price can breakout above 2250, then we will be in a new rally for the S fund.
It was an ugly week for the I fund! From Wednesday to Friday, the I fund wiped out over 3% of its value and closed at the early April price level of 78.50. On the positive side, it looks like price did get some support at the 50DMA. Friday was by far the biggest gap that we have seen on the I fund in the past 6 months. Gaps tend to be filled. That means, do not be surprised to see price rise to fill the gap, and hit resistance at the 10DMA, before rolling over to lower lows.
The F fund chart below continues to look very strong! We had a flat consolidation along the 50DMA from mid-April to mid-June. We had a nice price breakout last week, above the 114.75 resistance level. This week we saw a test of that breakout and a move higher. These are all healthy, bullish signs for the F fund.
We have had a ton of questions over the past few months asking us to write from the perspective of a more risky TSP investor. The price action this week gave me an opportunity to do that. As you can see, the Facts that are drawn from chart analysis apply to everyone. How those facts are interpreted in terms of you personal risk tolerance will drive your TSP reallocation decisions.
It’s going to be an exciting week! Mid-July tends to be either a summer low or high. I am looking for the market to continue lower from here but bottom out sometime in July… I am watching the indicators closely for an opportunity to get back into the stock funds.
Have a great week!