A choppy week made it difficult for TSP investors to navigate entry and exit points. The battle for direction was a constant, and what you thought you were buying or selling at the TSP trade deadline would be far from what you got. The S-fund was the only position that significantly hurt those who held through the week. The small cap index fell 1.7% while the C and I-fund lost less than 0.3% each. Bonds were not an alternative to stocks. The F-fund also lagged the C and I-fund after selling off late in the week.
The main event this week was the release of Consumer Price Index (CPI), which came out Thursday. The Bulls expected the CPI to lift spirits and get the stock market back to its July form. They were right, well for about 30 minutes. The CPI landed about where it was expected to, higher than the previous month, but up less than 3.5% from a year prior. Stocks opened higher following the report and continued on to new highs for the week in the first hour of trading. But everything and more was given back through the rest of the trading day.
The Producer Price Index followed up on Friday and did not help the market. Prices were higher than in July than expected for producers and that could be seen as a data point in favor of another Fed rate hike.
The bears argue that the low inflation numbers and dovish Fed projections were already priced into the market through the summer rally. The market is now looking further ahead than the bulls can see. The bears have made themselves contenders in August after seemingly being absent through July.
The bears don't have full control over the market yet, but we may face more volatility and choppy intra-day action as volume fades in the late summer trading sessions.
If you're interested in how your peers are dealing with this turbulent market, give The Last Look Report a try. We have our eyes on the TSP Talk AutoTracker community, and we're well informed on market conditions each day as we head into the TSP trading deadline.
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Here are the weekly, monthly, and annual TSP fund returns for the week ending August 11:
Large cap ETF SPY (C-fund) resumed its trajectory started in the first week of August. Large caps actually started the week with a decent gain over 0.9% on Monday. However, that would be the highlight for the bulls for the week. The market action was continually choppy for the rest of the week. Early gains were given back before the close and morning dips were bought in the second half of the trading session. This made timing your TSP trades very difficult if you were focused on short-term positioning.
SPY reached its low of the week early on Friday which closed a gap left open from early July. That gave some solid technical ground for the market to erase most of Friday's early losses. The C-fund ended the week with just a 0.27% loss despite the headache of a week it took to get there. The next technical checkpoint may be the 50-day EMA. SPY has not traded below its 50-day EMA since March. Can it hold as support and get the Bulls back to work?
The small cap index DWCPF (S-fund) took a deeper cut than large caps (C-fund) this week. The 20-day EMA looked like it may have held as support on Monday, but the broad market had a deep pull-back Tuesday, putting the index below the 20-day EMA and breaking below another summer rising trend line (dotted red). The index found its low for the week at the 50-day EMA. We looked the 50-day EMA in the SPY chart as a possible price target to test the moving average for support. It held in for the DWCPF chart, but the failed support of the 20-day EMA just days before may keep buyers hesitant to jump in just yet.
The S-fund fell 1.71% for the week, a more aggressive pull-back than in the C and I-fund. In the nine trading days so far in August, the S-fund has lost 4.31%.
The I-fund outperformed the U.S. stock funds for most of the week. But the C and I-fund split the difference on Friday after the I-fund fell nearly 0.8% on the day. For those watching for gaps, the I-fund filled an open gap from the previous week on Thursday. This would be the ETF's best day of the week, and in retrospect, was the best day to sell for short-term strategies. The ETF ended the week back below its 50-day EMA and with a small net loss over the five days. There is another open gap even higher, but investors may be more worried about the ETF fallling under rising support.
Bonds started the week off holding steady, but bond prices dropped sharply Thursday following the CPI numbers along with a bond auction which lifted filled the market with new supply. The sell-off on Thursday filled an open gap from a few days before. Bond prices fell further on Friday to fill the open gap from the previous week. The F-fund fell 0.64% to lag the C and I-funds for the week.
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 on the Market Comments page. If you need more help deciding what to do with your account, perhaps one of our Premium Services can help.
Thomas A Crowley
wwww.tsptalk.com
Last Look Report
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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.
