TSP Talk Blog

No deal led to market losses

Stocks were down every day last week, a week where Washington was playing Deal or No deal. This puts the magnifying glass on this week’s action because the “deadline” for making a deal on the debt ceiling is Tuesday.

For the TSP, the C-fund was down 3.91% for the week, the S-fund lost 4.90%, and the I-fund gave up 2.15%. Bonds (F-fund) gained 0.66%, and the G-fund was up0.07%.



After the sell-off last week, the C-fund finished down 2.04% for the month of July, the S-fund lost 3.14%, the I-fund was down 1.60%, the F-fund gained 1.59%, and the G-fund was up 0.22%.

The S&P 500 remains in its 6-month trading range after moving from the top toward the bottom last week. You can see that the 200-day simple moving average was tested again on Friday and we saw a little rebound off of it, and that is a positive sign, but there has been a lot of technical damage done and a quick improvement will be needed this coming week.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

As we talked about last week, one of the two more common outcomes of an inverted head and shoulders pattern is a test of the head before resuming the upside, which is what happened earlier in the year.

I was a little surprised that the S&P 500did not take the second option above, which is a breakout above the right shoulder (RS) without a test of the head, because the market was performing so well up until this past week despite the obvious debt concerns in D.C..

The market does not get blindsided very often so I am surprised that the market did not already price in a tough negotiating session in Washington. It seemed too obvious that the market would fall without a deal, so I expected the opposite, since the market seems to like to fool the most people at any given time. Well, I out smarted myself and the market found another way to surprise me.

So, deal or no deal, this market is going to be very volatile this week.

I will end with this overbought/oversold indicator to show you how oversold we are compared with other significant pullbacks and corrections.



Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.

Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive

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