TommyIV's TSP Talk Blog

The bulls found some footing mid-week to give life to what was becoming a dull and directionless stock market. Price range had been shrinking tighter and tighter in the previous week and that continued through the first two days of this week. But top government leaders sparked a two-day rally Wednesday and Thursday when they reassured Americans the U.S. will not default on debt. The confidence that debt-ceiling negotiations were going well was a sigh of relief for the nervous market, and restless investors were willing to set aside other anxieties that had kept the market flat over the last couple of months. The C-fund established a new high for 2023 on Wednesday and again on Thursday.

That sigh of relief was taken too soon. Stocks gave back some of Thursday's gains when once again there seemed to be a disruption in the debt-ceiling negotiations. It was reported that the talks between leaders and their staffs took a step backwards and negotiations have taken a pause. This dropped third strike is set to resume the market's unease and keep a resolution out of reach for now. A default in debt payments is worst case scenario, but this last-minute scramble to raise the debt-ceiling will have its own negative impacts even if the default is avoided. Lingering negotiations and last-minute loopholes will be a heavy burden for the market. The fear of a recession is likely to materialize if consumers are worried about the health of the economy and wait to spend their money.

Getting to a deal is only the first part, then begins the slow process of getting it passed through congress. The market may have swallowed new money this week with the short-lived optimism, but it won't take much for it to reverse course.

Federal Reserve Chairman Jerome Powell made public comments Friday. In his carefully planned statements, Powell implied the Federal Open Markets Committee will hold interest rates steady in their June meeting. This did not align perfectly with comments by other Fed members through the week, but investors look to him for the most prudent insight. Although Powell's suggestion that the stress in the banking sector was enough to slow the economy down without a of a rate hike was not comforting.

All three TSP stock indices were up for the week with the S-fund leading with 1.92% gain. Bonds on the other hand went the other direction and the F-fund chart took on technical damage on top of its 1.37% loss.


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Here are the weekly, monthly, and annual TSP fund returns for the week ending May 19:




Here is a two month bar chart of the ETF SPY (S&P 500), whose closing price is congruent with the C-fund price. The blue dotted lines are the edges of the trading range SPY had been confined to for weeks, through all of April and half of May. Another trading range was developing within the blue trading range. Beginning in the previous week, the price range was growing shorter and shorter. In the red dotted line we see that range forming a wedge> formation. Buyers and sellers were seemingly at a stalemate. But someone has to give. On Wednesday that wedge formation broke with price moving higher, they ended the day even with the blue dotted line resistance, but a second day of gains pushed the C-fund to its highest price of 2023.

The previous high for the C-fund price in 2023 was $64.19 established on February 2nd. This week the C-fund surpassed that price Wednesday before moving even higher Thursday. Thursday's price is now the new standing high for the year at $64.83. The C-fund gained 1.7% this week, which shows how close it has been trading near its highs for weeks.




The S-fund actually outperformed the C-fund for the week, but if we take a step back and look at this 2023 chart of the Dow Completion Index (S-fund), we see the two U.S. stock funds are in different technical worlds right now. While the C-fund established a new high for the year this week, the S-fund is currently 9.4% below its high from February 2nd. The index did make progress by moving above its 50-day Exponential Moving Average on Thursday, but still has the 200-day EMA as an obstacle above. The S-fund had an impressive week through Thursday where it had 2.66% in the first four days of the week, but the S-fund fell 0.72% on Friday to reduce its weekly gain to 1.92%.





While the stock funds were moving higher and breaking past technical resistance, bonds were slipping through support. The bond ETF BND (F-fund) slipped below its 200-day EMA (dark blue) on Thursday. The moving average had kept the price afloat and in a trading range for two months. Now the chart shows the price on a trajectory to fill an open gap from mid-March. The failure to raise the debt-ceiling in the next week will likely propel the price toward that open gap. The F-fund had a tough loss of 1.37% this 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.

I personally provide the Last Look Report. The report is a daily email on the TSP Talk AutoTracker moves, economic news, forum threads, and more before the IFT deadline. The service is aimed to give you daily insight to help you make your own IFT decisions. Emails are sent everyday weekday 30 minutes prior to the TSP trade deadline.

Thomas A Crowley

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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.