TSP Talk Weekly Wrap Up

Stocks were up again last week, helped by a strong rally on Friday which was triggered by a drop in interest rates in China, of all things. The reason for the drop in rates was because of some bleak economic data so it may turn out to be an emotional response to something that should be considered a negative. But the bull market appears to be in full force, and when in a bull market we shouldn’t be surprised to see positive reactions and results.

Here are the weekly, monthly, and annual TSP fund returns for the week ending November 21:

The SPY (S&P 500 / C-fund) broke out above a strong resistance line that we have been watching for weeks (blue). We had been expecting a pull back which would have continued what looked like an inverted head and shoulders pattern. Friday’s breakout had a couple of issues, however. First off, we like to see breakout hold for at least three days before confirming it. Second, the reason for the breakout was triggered, as we mentioned above, by an attempt to fix bad economic news. The fact that the S&P closed well off of Friday’s highs makes it a possible negative reversal day which, if compared to the one we saw in September (see the small red boxes) could be marking a peak. But we have been looking for a peak for some time now and this bull market has proven us wrong time and again, so I don’t want to get too bearish, but how long can it go up without some consolidation / pullback?

Will this be a true breakout, or are we seeing a head / right shoulder (RS) fake out?

The Wilshire 4500 (S-fund) posted a fairly significant reversal day on Friday and it had the feel of a capitulation from the bears similar to the capitulation by the bulls back at the October lows. We’ll see. There are signs but again, fighting this powerful bull market hasn’t been rewarding so far.

The EFA (I-fund) has been hopping above and below the 50-day EMA. It can’t seem to make up its mind which way to break, but the sideways action has had the effect of taking off its short-term overbought reading we saw after the late October rally.

The AGG (Bonds / F-fund) has been hovering above the 50-day EMA and as long as it can stay there, they should be safe. The downside pressure has subsided this month, but is it just a pause before another leg down, or can it make another push higher? It will probably depend on what happens to stocks. It will likely do the opposite.

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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