If you were in stocks this week, you enjoyed the first half with the TSP stock funds stretching to new 2023 highs. But the choppy action in the second half of the week makes you wonder if the bulls are losing their grip on this market.
Reasons to be Cautious
The poor action on Thursday cannot be summed up as healthy consolidation of the recent bull run. The selling was provoked by disappointing earnings reports from the tech giants Netflix and Tesla. The Nasdaq 100 had its worst day of the year on Thursday, but the selling was not isolated to indices carrying the large tech companies. The small-cap S-fund fell 1.2% on Thursday while the large-cap C-fund fell just 0.7%.
That should be a concern for stockholders if those Netflix and Telsa earnings reports were a preview to the rest of the tech sector. The real wave of tech earnings starts next week with the most notable names being Alphabet, Microsoft, Meta, and Amazon.
On top of the earnings concerns, next week we are promised another 25 bps rate hike by Federal Open Markets Committee. The hike itself is not the main focus but rather investors will be focused on what the Fed communicates for rate hike possibilities going forward. After the last Consumer Price Index the market convinced itself next week's rate hike will be the last in the Fed's fight against inflation. I think it is likely the Fed can't make that promise. They will want to keep rate hikes on the table if needed and will need to communicate that despite the backlash.
If you need more reasons to be cautious, go back and read Tom's Thursday Market Commentary.
Credit to the Bulls
To give the bulls credit, the S&P 500 (C-fund) and DWCFP (S-fund) charts have had an easy ride higher through June and now most of July. The recession narrative is dying and there is a sense that the Fed has inflation under control. This week's tech earnings disappointments have lowered expectations for next week's earnings so the market is more likely to celebrate a win.
IFT Decisions
If you're on the fence about making a move, then you have to prioritize whether keeping your latest gains is more important than missing out on more gains. Only three members jumped shipped when the S-fund was peaking on Wednesday in the TSP Talk non-premium AutoTracker. Those three members are up 5.52% for the month and I'm guessing they are not mad about it.
We'll be watching out for them and other AutoTracker top performers next week on The Last Look Report. Because next week could be a turning point in the market, I am opening up The Last Look Report for free next week. You will get an emailed report every morning focused on the market action and TSP Talk AutoTracker members' IFTs 30 minutes prior to the trade deadline. If you're interested, you can sign up here.
TSP Fund Performance
Despite taking the greatest loss on Thursday, the S-fund led the TSP funds for the week with a gain of 1.1%. Meanwhile, the I-fund lagged with a loss of 0.1% while it took on the weight of the rising dollar.
Bonds were basically flat for the week.
Here are the weekly, monthly, and annual TSP fund returns for the week ending July 21:
The Charts
The C-fund establish another new 2023 peak on Wednesday. I may have sounded a bit bearish for next week, but the SPY is looking great in this three-month stretch. There is room for a pull-back but in a long-term view, it has some inertia keeping its momentum higher. The C-fund was up 0.7% for the week.
The S-fund too has had an impressive three-month performance. Open gaps are concerning for the short term, but that small gap from the previous week was left behind. These charts look nice but they look very capable of wiping out weeks of gains in a few days under the wrong circumstances. The S-fund is up more than 4% for July which has created a lot of happy holders, 100 of them on the TSP Talk AutoTracker. The S-fund led this week with its 1.1% gain.
The EFA (I-fund) chart sits near its highs but looks the most troubling. It will take on more heat if the Fed is anything but dovish in next week's meeting. Despite the concerning open gaps, we noticed three top 10 members move to the I-fund this week in the Last Look Report. The I-fund lagged this week with a small loss of 0.13%.
Bonds jumped around this week but ended about where they started, between the 50-day and 200-day EMA. The F-fund added just 0.01% 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.
