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TSP Talk Weekly Wrap-Up

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TommyIV is on vacation this week so I'm (Tom Crowley) filling in for him.

If you were waiting for volatility to finally spike in this market, your wait was over as the nuclear war rhetoric hit the market hard this week. Yes, the market was way overdue for some kind of pullback and this may have just been the excuse to do some selling. We saw evidence in the prior weeks of internal weakness while the major indices made new highs, especially the headline grabbing Dow, but some of the more broader indices like the small caps and Transports are already down 5 or 6% from their peak.

Now that we've had this pullback, and relatively speaking it has not been all that severe in the large caps, what happens next week? I guess it depends how this war of words plays out between President Trump and North Korea. My guess is that China will defuse this and we'll go on as usually, but still, the market was in need of a little cleansing from some overbought conditions.

Here are the weekly, monthly, and annual TSP fund returns for the week ending August 11. The small caps have lagged this month and the safety of bonds has led with a modest gain.

The SPY (S&P 500 / C-fund) has been testing the 50-day EMA for a couple of days and hung on precariously so far. The bottom of the large trading channel is all the way down near 242, so that's a possibility, but in a bull market the bulls will try to defend that 50-day EMA.

The DWCPF (S-fund) has been hit the hardest and its pullback started well before this North Korea mess. There's some decent support at Thursday and Friday's lows, and in the short-term, this index is pretty oversold and could see a relief rally that could target those small overhead open gaps. Where it goes after that, I don't know. It's below the 50-day EMA and that's certainly a red flag for the intermediate-term.

The EFA (I-fund) has seen a healthy pullback down to the 50-day EMA. Nothing here is too alarming, thanks to the U.S. dollar's weakness which keeps a little cushion under the I-fund.

The AGG (Bonds / F-fund) rallied, but perhaps not as much as we might have expected given the negative reaction in the stock market. Bond prices and yields are not that far above where they were at June's peak. This may be a good tell for the stock market. Investors would normally flock to bonds if they were really concerned.

Good luck and thanks for reading! We will be back here next week with another TSP Wrap Up. You can read our daily market commentary at TSP Talk - Market Commentary. If you need some help deciding what to do with your account, perhaps one of our premium services can help.

Tom Crowley
Weekly Wrap-Ups Archive
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The legal stuff: This information is for educational purposes only! This is not advice or are commendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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TSP Weekly Wrap Ups


S&P 500 (C Fund)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)