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TSP Talk Market Commentary 03/23/2020

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Stocks continue to succumb to the outbreak of the coronavirus as investors, traders, and money managers try to put a number on the impact it will have on the economy and corporate earnings. After a positive morning for stocks on Friday, the bears took over in afternoon trading and put the pressure back on. The Dow gave up 913-points with losses near 4% or more in most of the major indices. Bonds rallied but they remain volatile as well.

Daily TSP Funds Return



While the percentage losses haven't reached the levels we saw in 2008, the swiftness of the decline makes this bear market something different. We've seen some wild and varying projections about what this will do to the economy but it's tough to know.

In a bear market I look at things differently - the charts, the indicators, and even the trading system I have (The TSP Talk Plus system) use different parameters. Our system actually went into bear market mode back on March 2nd, which sounds great because buy signals are tougher to get in a bear market and sell signals are triggered quite easily.

The problem is, that even using our system's bear market parameters, the downside pressure was so great that we were still getting buy signals. With our TSP trading limitations and early deadlines, it's tough to do much. While we've seen big daily gains of 1000+, even a near 2000-point rally in the Dow, we still haven't seen back to back positive days all month. I've been able to beat the index and TSP stock fund returns, but in this scenario that isn't saying much. My system has suffered losses.

Bear market rallies can be explosive so you'd hate to miss them. A 20% bounce would not be unusual under these circumstances, but the bear will try to take that back as soon as it can so timers have to remain very nimble if they dare to venture into this market.

I've been down this road before and expect to fight through this, but I have to hand it to our other two Premium Services. Intrepid Timer has been able to sidestep the bulk of the losses this year with a few well timed trades, and RevShark is actually sitting with a gain of 4% for the year as he has treaded very lightly and stuck mostly to bonds and the G-fund so far this year. So, nice job guys!

No one knows where the bottom is. It could come today, it could come in 6, 9, 18 months? But stocks most likely won't go straight down no matter where the bottom is, but if fear levels are an indication... I've used these quotes a couple of times since this decline began and how appropriate is it now?


"The time to buy is when there is blood in the streets. Even if it is your own."
- Baron Rothschild

Be fearful when others are greedy and greedy when others are fearful.
- Warren Buffett



They are working on a $2 trillion, with a "T", package now to stimulate the economy, which would normally be a giant boon for the economy and the stock market. The problem is no one can spend money because we're all sitting home.

We have some options at this point. Sit out and wait for signs of life. We can buy or stay in stocks knowing they will eventually go higher. At this point, with the C, S, and I funds down 28%, 37%, and 32% respectively, these prices may be getting very appealing for those looking 3 to 5 years or more down the road. Another option is to try to battle your way in and out of this market looking for those large bear market rallies, and talking profits where you we can. That's not an easy task, but if stocks remain depressed for any length of time it may be your only hope for grinding out any kind of gains.
To each their own. Your approach should depend of your tolerance for risk, your ability to follow what's happening in the market - not necessarily the news, and knowing what makes markets tick, and sometimes that means going against the grain which isn't easy to do, but that's how people like Warren Buffett approach investing, as we see in his quote above.

This is my job here, trying to figure out this market, but obviously the most important thing for us all to do right now is to stay safe and get past this so we can someday enjoy our retirement accounts that we work so hard to build.




The S&P 500 (C-fund) remains in a nasty downtrend, although if we get picky we could say that Friday's high was trying to push through the descending resistance line, but that was before the afternoon bears jumped in and reversed everything. With the index closing at the lows, we now have a similar setup to what we've seen at the prior red horizontal support lines - all of which resulted in another leg down.




The weekly and monthly charts below show the longer-term technical damage being done as major support lines get taken out. A relief rally up to the 200-week moving average could also be possible while this volatility continues, and the 200-month moving average could be an eventual target on the downside.




The DWCPF (S-fund) has stabilized a bit having held the Wednesday's low for a couple of more days. The problem is, if it doesn't make a big move up soon, it could just be another bear flag forming.




Being the economically sensitive commodity that it is, the price of copper has been getting slammed through all of this but there was a sign of life on Thursday when it reversed dramatically of its capitulation-like low.




The price of oil has been adding pressure to the volatile situation with its 10% to 20% moves each day - breaking records on the up and down side along the way. Obviously demand is down with everyone staying home, but also the price war going on isn't helping. It looks like a possible bear flag forming, but how low can it go? I'm seeing some reports of gas prices already falling below $1 a gallon in some places, so it's not all bad for us consumers.




I'm still keeping an eye on China's Shanghai Index which, if you remember, bottomed shortly out after they reopened their stock market in early February, after having closed it because of the coronavirus outbreak. It came roaring back but has since come back to test those lows and is trying to bounce back after what looks like a possible successful test. If they can get their economy back on track, it may bode well for investor sentiment here.




The AGG (bonds / F-fund) rallied for a second straight day on Friday but remains in a steep downtrend and below the 200-day EMA. Yields on the 10-year T-note had rallied up to the 50-day EMA before finding resistance and now that 0.9% area may need to hold as support or that could be a big bear flag getting ready to breakdown.




For those of you who use AGG during the day to follow the F-fund, you know the frustration of its inaccuracy. This quote is more accurate as far as matching the F-fund's daily return, but unfortunately it is not updated until after the market closes so it doesn't do us much good during the day. https://www.bloomberg.com/quote/LBUSTRUU:IND



Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

For more info our other premium services, please go here... www.tsptalk.com/premiums.html

Thanks for reading. We'll see you back here tomorrow.

Tom Crowley



Posted daily at www.tsptalk.com/comments.php

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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SPY (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

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

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AGG (F Fund) (delayed)

(Stockcharts.com Real-time)

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