The bulls took their summer vacations and their profits this week. Price momentum shifted sharply after both the C and I-fund reached new 2023 highs in the previous week. This week all three TSP stock funds were down, the I-fund's 3.26% loss was the worst of them all. The C and I-fund each saw a single day of gains amongst a sea of red, and those gains were not impressive. The S-fund was down all four days.
The argument for the pull-back is clear as day in retrospect. The bulls ran right past the Fed's warning signs that the latest rate pause was not market friendly and the 'Fear of Missing Out' quickly turned into 'Fear of Losing Profits'. This week investors faced weakening global economic data, monetary tightening by central banks abroad, and two days of the Fed Chairman Jerome Powel reiterating to Congress the Fed's desires to continue its fight against inflation — more rate hikes. Now that we can clearly see the wreckage behind us, where are prices going from here? Was this a healthy pull-back that allowed an entry spot for the underinvested? Or did we just pull-back from a peak the market will be looking up to in the months to come? The answer will be obvious once it has already happened.
What we can appreciate was that the red days were mostly mild this week. We are not seeing a market in free fall where week's of gains are erased in a single day. If a TSP investor wanted out during a down day this week they could do so without suffering too much more loss between the TSP trade deadline and the market close. Friday had the sharpest decline for the TSP stock funds across the board, and all the TSP stock funds are still up for the month of June.
Next week technical support built over the last few months will be tested for the U.S. stock indices next week. The I-fund's ETF EFA slipped right through similar support this week; could this be a foreshadowing what we will see for the U.S. indices?
The F-fund was the best destination for those leaving stocks this week. Its 0.14% gain this week came after the F-fund gained 0.36% on Friday alone. The G-fund only gave a 0.07% return to those out of stocks.
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Here are the weekly, monthly, and annual TSP fund returns for the week ending June 23rd:
The C-fund took a turn this week. Stocks rallied past the Fed's rate hawkish rate pause last week and finally showed a little weakness on the final day of the week. That weakness last Friday set a tone that would resume on Tuesday of this week. New buyers dried up and the price corrected the optimism that continuously drove stocks to new 2023 highs in the first half of June. The question is how much longer will it correct before the buyers return in unison. The 20-day EMA is within reach and has not been matched yet in June. We have a trend line (smaller red dots) from the spring trading tops that could act as support in if this trend continues into next week. The C-fund fell 1.37% for the week.
Some analyst have touted small caps are on the verge of a rebound to close the gap between them and large caps. That was not the case this week. The S-fund fell with the C-fund this week but dropped nearly 3% against the C-fund's 1.37% loss. The small cap index DWCPF and the S-fund was down all four days of the shortened trading week. The S-fund's worst day of the week came Friday where the small cap fund shed 1.29% for the day. The S-fund ended the week with a loss of 2.95%, although it was not the worst performer of the TSP funds.
The I-fund held the crown for worst performer for the week. The I-fund lost 3.26% for the week. The price action has been sporadic over the last month. After making new high for 2023 last week, the I-fund is now back below its 20 and 50-day EMAs. Very quickly the ETF EFA slipped through what was a trading channel for more than a month but could not hold the price past Thursday. The index gapped down twice this week including Friday's open where the I-fund lost 1.54% for the day.
The F-fund was TSP investor's best landing spot outside of the stock funds this week. The F-fund was up 0.14% while the G-fund was up just 0.07%. In the three month look at the BND (bond ETF chart) we see the price has been confined by the 200-day EMA over the last month. BND did close above the moving average on Wednesday but quickly opened below it the next day. The F-fund was headed for a loss this week at the end of Thursday, but a 0.36% gain on Friday lifted the fund to a weekly return to outperform all of the other TSP options. But will its tightening range establish a rising support line strong enough to lift it past its 200-day EMA?
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 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.
