TSP Talk Weekly Wrap Up

After finally bottoming on October 15th, stocks followed through this past week with some solid gains. We saw a combination of strong earnings reports, an oversold market, and investors who were underinvested trying to get back into stocks, and that translated into a sharp rebound off the lows.

Here are the weekly, monthly, and annual TSP fund returns for the week ending October 24:

This has been one of those years where you couldn’t just get into any stock fund and do well. There is a large disparity in the returns between TSP’s three stock funds, the C-fund, S-fund, and I-fund, with 2014 returns of +8.10%, +1.87%, and -4.65% (a loss), respectively.

The SPY (S&P 500 / C-fund) has gone virtually straight up since bottoming 8 trading days ago. This angle of incline cannot be sustained for too much longer and we may see some consolidation of these gains in the coming days. Whether that manifests as a sideways move, a modest pullback, or even a test of the October lows, look for some kind of a slowdown so the market can refuel before going any higher. It’s rare to see the rebound as steep as the decline.

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

The Wilshire 4500 (S-fund) has rallied strongly and of the three stock funds, has actually had the biggest rebound off the recent lows. But the 50-day and 200-day EMAs, particularly on the Russell 2000 Index (not shown) which is a small cap index, may be tough to clear on the first attempt. You may have heard the lovely phrase, a “dead cat bounce.” This refers to the opinion that even a dead cat would bounce up if dropped from a high enough level. This recent rebound seems to be a little stronger than a typical bear market relief rally, but let’s see if it can continue in the face of the EMA’s in the way right now.

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

The EFA (EAFE Index / I-fund) has lagged this fall, with a lot of that having to do with strength in the dollar. But the dollar has been strong relative to the European currencies as we see recessionary concerns spreading throughout Europe. It does have some room on the upside if it has the strength to rally up to the declining 50-day EMA, right now this is the lagging stock fund.

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

The AGG (Bonds / F-fund) has drifted lower after peaking in what could turn out to be a long-term top for bonds. That doesn’t mean bonds will go straight down from here, but that October peak means the path of least resistance could be down in the F-fund, where rallies should be sold.

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

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 http://www.tsptalk.com/comments.php. If you need some help deciding what to do with your account, perhaps one of our premium services can help.

Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive
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The legal stuff: This information is for educational purposes only! This is not advice or are commendation. 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.