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TSP Talk Weekly Wrap Up

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Stocks officially corrected 10% off the January highs this week. The change in market character over the past two weeks has shocked investors who struggled to navigate the new magnitude in volatility that has been absent in the market for more than a year. The increase in volatility was met with a sell-off that has wiped out the gains of the fruitful month of January where we saw an increase in upward momentum from the last months of 2017.

The exact cause of the correction is debatable and is most likely the result of several different factors. The rare jump in volatility may have flooded the market with sellers who had shorted volatility that had thus far been profitable with the tranquil nature of the market leading up to the end of January. Once volatility increased, those traders were forced to reverse their bets on market swings and sell stocks to reverse the damage.

Trading algorithms were also blamed for driving the sell-off once started and forcing large hedge funds to make some big moves to protect profits. Worries about the upcoming increase in interest rates from the Fed may have also been a factor but a couple of Fed members made comments this week that the correction does not affect their decision of interest rates and rather they see the last couple week's action to be healthy for stocks that are quite expensive at the moment.

Major indices experienced the 10% correction and now sits at or near long-term trend lines. Does that mean investors are ready to put more cash back into stocks again or will the downside continue? It does seem as though the sell-off has made its mark and has opened up some buying opportunities but the character of the market has changed and traders will have to adjust with it.

Other than the G-fund, all the TSP funds were down with the I-fund taking the greatest loss of 6.2% for the week. The F-fund was down under 0.1%.

Here are the weekly, monthly, and annual TSP fund returns for the week ending February 9th:

The SPY (S&P 500 / C-fund) easily fell below its 50-day EMA early in the week and eventually hit its lows around the 200-day EMA. This gives traders more trust in the 200-day EMA as support moving forward. There are some noticeable downward trend lines from the last couple weeks but they are a little premature to have much credence moving forward. The C-fund was down 5.11% for the week.

The Wilshire 4500 Completion Index (S-fund) did trade below its 200-day EMA Friday but closed back above it. The S-fund took less heat than the C-fund with a loss of 4.77%.

Global markets were also affected by the correction leading to $IEE (EAFE Index / I-fund) also falling down just above its 200-day EMA leaving a couple more open gaps behind. The I-fund lagged the TSP funds this week with a loss of 6.2%.

AGG (Bonds / F-fund) did not always correspond with how stocks were trading leaving a little mystery to the involvement of the increase in bond yields to sell-off in stocks. The index traded within a falling trading channel but was just down 0.09% for the week.

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 the Market Comments page. If you need more help deciding what to do with your account, perhaps one of our Premium Services can help.

Thomas A Crowley
Weekly Wrap-Ups Archive
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The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. 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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SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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AGG (F Fund) (delayed)

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