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TSP Talk Weekly Wrap Up

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Headlines of a surge in virus outbreaks in a number of states sparked selling in the second half of the week pushing stocks into negative territory. Despite around 3% in losses for U.S. stocks this week, the market remains essentially on hold. After weeks of relentless upside indices now are jumping around in a sideways trading channel; the week just happened to end at the bottom of that range. The possibility of another economic lockdown keeps investors ready to take profits and get out of stocks. We also saw trade tensions rise between the U.S. and China which use to alone drive markets. Financials were hit hard Friday once investors processed the Fed urging banks to put a cap on dividends. With all this against stocks, why shouldn't we expect another massive sell-off?

For one, the Fed is our friend. At least that's what investors had assured themselves while stock prices were surging among other bad news less than a month ago; although the Fed's suggestion to banks to cap dividends was not very friendly to bank investors. Underlying support from moving averages along with the arbitrary yet significant 3000 level of the S&P 500 add support and an entry target for dip buyers. Looking back on the rise of what was the V-shaped bounce, we saw stagnation and selling in late April and early May. Bulls eventually came out on top then, why not now?

The healthy move for the market would be to trade sideways in a channel for a bit and let fundamentals catch back up with reality. However this is 2020 where the theme of the year has never been mediocrity. Investors will move to preserving capital if the market ever feels like a real threat. The reliance of the underlying support will be that indicator for those with their finger over the sell button.

Next week will be the June jobs report on Thursday. With so much in the air and the dramatic and surprising number of the last few jobs reports ensure investors will be very attentive to these numbers.

Bonds were a safe haven for investors this week. The F-fund rose 0.21% for the week. U.S. stocks took the most heat this week. The S-fund lagged falling 3.08% for the week.

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

The SPY (S&P 500 / C-fund) hit its weekly highs Tuesday which happened to be the highs of the previous week. A sell off Wednesday slid right through the 20-day EMA which had been a support level since the previous Tuesday and rising trend line of the March and May lows. The index took a step back to the moving average Thursday but a sigh of selling Friday pushed the index down to test its 50-day EMA which held. The trading range now is the highs of the last couple week and the 50-day EMA. There is an open gap from May below but filling the open gap would mean falling below the support levels the bulls are so reliant on at the moment. The C-fund fell 2.85% for the week.

The Dow Completion Index (S-fund) also fell below its 20-day EMA but found more support from the March and May lows trend line. The index did close below the trend line Friday but did not move to its 200-day EMA that sits below. The S-fund lagged the TSP funds with a 3.08% loss.

EFA (EAFE Index /I-fund) gave a clue to how the 200-day could be a strong support level for the other indices. The I-fund losses were kept under 1% for the week. Support from the 20 and 200-day EMAs as well as the rising trend line from the March and May lows all intersected where the index closed for the week. Now can the index show some strength to the upside while its in a wedge formation?

The AGG (Bonds / F-fund) led the TSP funds for the week with a 0.21% gain. The action of AGG is very similar to what we saw coming out of May. To complete the move we'd expect a pull back to test the 20-day EMA again. The performance of stocks will dictate if this trend will continue

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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