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TSP Talk Weekly Wrap Up

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Turmoil in trade negotiations between the U.S. and China triggered broad selling across the stock market. Progress in trade negotiations has been a contributor to the success in stocks so far this year. Last week it seemed negotiations were nearing an end but the established negotiations nearly collapsed last weekend due to accountability disputes that left the U.S. unsatisfied. A threat by President Trump to add more tariffs to Chinese goods sparked a four straight days of losses across stock indices leaving all three TSP stock funds with more than 2% in losses this week.

Those additional tariffs were added but notably stocks turned around after early losses Friday when it was clear trade negotiations were set to resume and a complete breakdown in trade was avoided. Stocks produced gains late Friday to end the streak of losses.

Three of the five days this week dip buyers brought stocks off early lows; a good sign the bulls are not giving up. A pull back has been in the back (or front) of everyone's' mind during this year's relentless climb. Although the bears had a big win this week there were enough buyers to keep this week from being a complete disaster for stock prices. Summer months historically are the weaker part of the year for stocks so the timing of this halt in momentum will make it harder to get stocks back on track. Rather the bulls best efforts may be to keep the gains produced so far this year.

The potential economic effect of a crisis in trade sent investors into bonds to give the F-fund a gain of 0.31% for the week.

Here are the weekly, monthly, and annual TSP fund returns for the week ending May 10th:

The SPY (S&P 500 / C-fund) fell below its 20-day EMA in the first half of the week bypassing rising support of the last two month's action. Thursday and Friday the index fell below its 50-day EMA but was able to recover back above it both days. An open gap from late March was closed Thursday which also marked the lows of the day so traders were keeping an eye on the open gap. The index now has a short-term declining trading channel established. The C-fund fell 2.1% this week.

The Dow Completion Index (S-fund) should be less affected by new tariffs but the trade turmoil brought a broad sell-off for stocks. The action was very similar to large caps including filling an open gap from late March. Resistance from the highs of February and the 20-day EMA established the highs of Friday. The index now sits between its 20 and 50-day EMA. The S-fund was down 2.19% for the week.

EFA (EAFE Index /I-fund) filled an open gap this week while falling below its 50-day EMA. The 200-day EMA acted as support although the index did fall below it intraday Thursday but recovered. Another open gap from February lingers below with no obvious support besides the 200-day EMA it rebounded off of Friday. The I-fund lagged the TSP funds with a loss of 2.58% for the week.

AGG (Bonds / F-fund) was up for the week but reached its highs for the week early before bouncing around. The trade headlines have been so touchy that investors may be moving to cash while things settle between the two countries. The index still has two open gaps below but would need to fall below both the 20 and 50-day EMAs to fill them; something we haven't seen in the bond index for some time. The F-fund led the TSP funds this week with a gain of 0.31%.

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
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