TSP Talk – Fork in the Road

Weekly TSP Wrap-up from TSP Talk

Breakout – Can it hold?

Stocks had a rare down day on Friday after going nearly straight up for several weeks. While smaller capitalization stocks have led the way higher this year, they lagged this past week, but that is not necessarily a bad thing as the indexes have become overly extended and may need a break to reload.

For the week, the TSP stock funds were mixed. The C-fund was up 0.87%, but Friday’s selling took the S-fund and the I-fund into slightly negative territory for the week at -0.25% and -0.12% respectively.

The F-fund (bonds) were up 0.19%, and the G-fund added 0.06%.

For the month of March, all of the stock funds remain firmly in positive territory with the S-fund leading the way with a +6.41% gain, followed by the I and C funds, which are both up just over 5%. The F-fund has gained 0.21% in March, and the G-fund is up 0.17%.

Last week we talked about the S&P 500 being at a crossroads. We were expecting either a breakout above the double top formation, or a pullback from the double top. We compared the current situation with two similar setups in 2007.

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

Both of the 2007 charts broke out above resistance, but the one we are concerned about now is the late 2007 chart, which broke out for a few days before pulling back, and eventually correcting sharply.

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

If the S&P 500 can stay above the support levels (marked “X” in white in the top S&P chart above) through the end of March, which is 8 more trading days, I will feel a lot better about getting aggressive again. But if we start seeing the market run out of steam and move below support, we could be looking at a more severe pullback.

Based solely on he charts, I am bullish and expect good things this year, but I am getting a defensive plan in place because I do not like the fundamentals of the economies home and abroad, and I want to be prepared for whatever the market may throw our way.

Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.

Tom Crowley


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