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TSP Talk: A successful turnaround - so far

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Monday was the real turnaround day but Turnaround Tuesday was also living up to its name as the Dow, down 300 at one time yesterday, ended the day up 183-points. It was also the first positive close for the S&P 500 since the first trading day of the year. The dollar was down sharply pushing prices up almost across the board. Bonds were up as well for a change as yields slipped from recent highs.

Daily TSP Funds Return
We were due for some relief after last week's selling, but I was a little surprised at the strength given the anticipation of the CPI and PPI reports today and tomorrow, which could be market movers. With the Fed still on the fence about how aggressively they want to raise interest rates, these inflationary data reports could either resume the selling from last week, or keep this week's positive reversal going a while longer.

Internally it was as good as the indices appeared with issue and volume ratios heavily in favor of advancers. The weakness at the open did help push the Nasdaq new lows to a hefty 172, which is high for a day where the index was up 1.4%, but well off the 500 - 600+ we were seeing over the last month.

The yield on the 10-Year Treasury fell to 1.75% after moving above 1.8% on Monday. It's been a sharp rally and now that the Fed is taking its foot off the gas peddle of their bond buying program, it seems now that traders and investors are more in charge. That was what kept yields low for so long, and bond prices elevated. Now yields are more on their own trading in a more free market.

The dollar got hit pretty hard on Tuesday and it is flirting with a breakdown after closing at its lowest level since mid-November. That should help the I-fund, but also, when the dollar falls, prices become more inflated and that's why we saw gold, silver, copper, oil, even bitcoin finally go up.

A lot of wealth was drained with this recent slide in the price of crypto-currencies and the stock market felt that pain. You can see that when bitcoin is doing well, the stocks market goes along with it. But during the sell off since the early November peak, the S&P 500 has basically been flat. So even if you are not participating in the bitcoin market, keep an eye on it because it may be a tell for the stock market. Bitcoin was up 2% yesterday and it's looking for support near 40,000.

So far this is just an oversold bounce off the recent lows. We still have a Fed that is hawkish, looking to raise interest rates and lower their balance sheet and that is a big difference from what we've gone through over the last two years since the COVID stimulus was flowing from every direction. That may not be the best environment for stocks, but it may be a good environment for trading and market timing in a more choppy market.

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The S&P 500 / C-fund is following a pretty reliable script right now, and we can only hope it continues. We were watching that 50-day EMA and saw that a break below it was a good place to anticipate a low. So far so good. Some of the other charts are not in this good of shape, and so we may not get good clues here of the internal strength or weakness of the market. Still, the S&P had a mind of its own in 2021 more than doubling the returns of the other stock funds, so you never know.
One area of concern is right here, right now, as you can see by the blue line and arrows.

The DWCPF (small caps / S-fund) had a big day on Tuesday after a major breakdown and positive reversal on Monday morning. That breakdown may be more than meets the eye so while this bounce looks good, it's not out of the question that the 2050 area won't get tested down the road again. It's still more than 10% off the November highs so if you like bargains we have one. But there's no guarantee that Monday's low will be the low. The chart has some issues around the 2175 area 2225.

The EFA (I-fund) took off after the dollar's recent pullback and it made its way back above the 50-day EMA, so that's a good sign. If it can get back near 80 it will have to deal with the top of that large channel, which could make or break the I-fund.

BND (Bonds / F-fund) finally got some relief after breaking down last week and falling for 7 straight days. The bottom of that channel, which it broke through, can now act as resistance, although that large open gap can be a draw.

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

Tom 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.

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S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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Yahoo Finance Realtime TSP Fund Tracking Index Quotes