TommyIV's TSP Talk Blog

The sell off in stocks resumed this week as the bears have had complete control of stocks this October. The pattern this week was two series of a sharp sell-offs followed by a rally the next day. In both cases the sell-off was more dominant than the buying that trailed. The net result was a loss of nearly 4% across major stock indices.

It doesn't seem too useful as an investor to analyze why stocks are losing value suddenly. That just happens to be the case for now. Rather, one should step out of the box and think about the mindset of other investors. The rallies on Tuesday and Thursday both were unable to move back into positive territory. That tells us that the buyers were mostly short-term flippers taking profits. Traders were buying on the way up but most had their eye on a certain price of the particular equity where they felt safe to get out.

Faith in stocks is diminishing this month and those who have been adamant holders are being punished. There has been a lot of talk lately that we are seeing the end of the nearly 10-year old bull market. This may or may not be the case, nobody can say for sure. But with that being a possibility it is important to protect capital.

Although the bond market has not been the best place to leave your money to sit the past couple months, it has been the safer alternative for investors as recent ugly action in stocks plays out. The F-fund outperformed the TSP funds with more than a 0.5% gain for the week; the fund is still down for the month.




Here are the weekly, monthly, and annual TSP fund returns for the week ending October 26th:




The SPY (S&P 500 / C-fund)) fell back below its 200-day EMA and produced a lower low for the month. This index is in a decent downtrend and who knows how far the price has to drop to attract buyers. The 200-day failed as support but does not tell us how strong of resistance it will have. I suspect a test of this soon and that will give everyone a better idea of the technical health of SPY. The C-fund fell 3.93% for the week.




The Dow Completion Index (S-fund) matched the action of SPY for the week but finished with a slightly greater loss to lag the other TSP funds. Just below the current price the lows of 2018 from the sell-off in February.




EFA (EAFE Index /strong> I-fund)) also produced more than a 3% loss for the week. There may be falling support to help switch the momentum of this index. The trading channel trend lines have held very well the past month and with the price as cheap as it is it would make sense for the resistance line to break before the support line. How much sharper could the index fall anyway?




AGG (Bonds /strong> F-fund)) was the safe haven for investors leaving stocks. The index jumped up on Friday but its highs were matched with the 50-day EMA. Now with an open gap below and the successful hold of the 50-day EMA as resistance, a pull-back seem plausible before the falling trend ends.




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
www.tsptalk.com
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