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TSP Talk Weekly Wrap Up

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Stock indices were agitated this week with inflation in the hot seat. The first half of the week was the steepest sell-off since October and by Wednesday's close the C and S-fund were down 4 and 5.3% respectively in those first three days. Dip buyers and opportunistic traders jumped back into stocks and the last couple days brought decent gains to cut the early losses. Friday's gains were steady and held not far from the highs. This was a vote of confidence by investors in the resilience of stocks, the economy, and the Fed to do what is best for the market (even if that's not their job).

The mood swings this week were a result of further digestion of the previous week's disappointing jobs report topped with a staggering Consumer price index surge that suggests the fears of inflation are materializing. Inflation will hit raw materials that will cut into the profit margins of public companies that will raise their prices to compensate and most likely force the Fed's hand to raise borrowing cost to counter sooner than expected. Investors have been quite use to the monetary ease that has pushed markets higher for more than a year. The Fed did a great job settling those near term concerns by assuring they will need a few more months of data to make a move to determine whether or not this spike in inflation is temporary.

This of course will likely lead to more volatile down the road in anticipation of that data, like the next jobs report, knowing the fed is paying close attention.

Bonds fell with and rose with stocks this week and landed at a 0.37% loss for the week compared with the1.25% or more losses in the TSP funds. Bonds lose value with inflation.




Here are the weekly, monthly, and annual TSP fund returns for the week ending May 14:




The SPY (S&P 500 / C-fund) gapped down Tuesday and fell more to its lows Wednesday where its closed about even with the 50-day EMA. There was an open gap from early April just below but the dip buyers were satisfied with a hold of the 50-day EMA to buy the newly discounted fund. By Friday the index was back above its 20-day EMA and filled that open gap from Tuesday. Still wasn't enough to off set the early losses and the C-fund fell 1.35% for the week.




The Dow Completion Index (S-fund) did not have the moving averages to help hold as support. The index had fallen below its 50-day at the beginning of the sell-off on Monday. The index did outperform Friday with a 2.61% on the day. This gain put the index above falling resistance but was only enough to put the S-fund weekly loss to 2% which was the greatest weekly loss among the TSP funds.





The VIX Volatility index spike this week to levels last seen in early March but once stocks began to get bought back Thursday and Friday volatility cooled down to its moderate levels. Peaking at the left of the chart below we can see the trading days surrounding the beginning of March settled for a couple days before a second have of greater volatility.




EFA (EAFE Index / I-fund) found support at the 50-day EMA at the lows of the week's pull back. Two open gaps were produced this week and the index left both unfilled. The index did climb back above its 20-day EMA and is realistically a couple of decent days away from new highs if it keeps the momentum from Thursday and Friday. The I-fund was down 1.28% for the week.




BND (Bonds / F-fund) fell below support from the trading channel its been in since March. The index gapped down with stocks on concerns of inflation which lower the purchasing power of the fixed income produce from bonds. When inflations concerns were lightened in the last two day, bonds attempted their own recovery for the week but the highs Friday were kept to it 20-day EMA. The F-fund lost 0.37% 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

www.tsptalk.com
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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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S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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Yahoo Finance Realtime TSP Fund Tracking Index Quotes