TSP Talk Blog

Breakout!

It was a good week for the stock and bond market last week as April closed with some very nice gains. We now enter the weaker 6-month stretch of the year so we will find out if this bull market can keep roaring after the breakout.

For the TSP, the C-fund was up 1.99% for the week. The S-fund gained 2.19%, and the I-fund led the way again at +2.49%. Bonds (F-fund) gained 0.63%, and the G-fund was up 0.07%.



For the month of April the C-fund was up 2.96%, the S-fund gained 2.94%, and the I-fund jumped 6.03% as the dollar weakness added the extra push. The F-fund (bonds) gained 1.28% on the month, and the G-fund made 0.25%.

Last week we focused on the inverted head and shoulders pattern on the S&P 500 chart.

Chart provided courtesy of www.decisionpoint.com

Obviously, when a chart hits resistance, particularly the neckline of an inverted head and shoulders pattern, it can do one of two things; Breakout or pullback. Last week we showed you these two common inverted H&S pattern scenarios.


We got our answer this past week as the S&P cut through the neckline like a hot knife through butter.


Chart provided courtesy of www.decisionpoint.com

I usually like to see 3 to 5 closes above the breakout point before I feel safe it holding, and depending how you draw the neckline, we’ve had 3 or 4 already. See this chart for the 2007 false breakouts.

At some point we could a pullback to the neckline, and resistance once broken, should act as support. (See the first example above.)

If there is a negative it is that we are heading into the weaker 6-month period of the year for stocks. Since 1950, the months of November through April have given the market virtually all of its gains, and the May through October period was not much better than flat. Of course that is an average and it is not true every year, although it was last year…


Chart provided courtesy of www.decisionpoint.com

Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.

Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive

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