TSP Talk – Stocks Breakout but Oil Might Also

After several attempts in February and March, the S&P 500 was finally able to breakout to new highs last week, pushing all three TSP stock funds into double digit gains for 2012. The question now is, will the rally continue, or will the very bullish looking chart of oil become a burden on stock prices?

For the TSP, the C-fund was up 2.48% last week, the S-fund gained 1.66%, the I-fund made 2.42%, the F-fund (bonds) lost 0.69% as the bond yields broke out, and the G-fund was up 0.03%.

For the month, the C-fund is up 2.93%, the S-fund has gained 2.39%,the I-fund had added 1.58%, the F-fund is down 0.96%, and the G-fund is up 0.07%.

The S&P 500 is now trading above the 2011 highs, and while the trends are up and this is clearly bullish action, the index in pretty extended above the 200-day EMA. Also, if the price of oil breaks out, as it appears it may, can stocks and the economy withstand the pressure of even higher gas prices?

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

Oil pulled back off of its February highs and for all intents and purposes, filled the gap left open in mid-February. The big bull flag, if played out, would have an upside breakout target near $125. This would certainly have an impact on the stock market at some point.

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

Bonds and the F-fund broke down last week. If there is a positive side it is that the open gap from last October was filled and the TLT, an oil ETF (exchange traded fund), has been able to close above the 200-day EMA after 3 consecutive tests. If the 200-day EMA is taken out, there is a lot of room below for some damage in the F-fund.

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

So for the F-fund, this is case of – if the current support holds, we could see a bounce. But if the support cannot hold, bonds could really rollover and the G-fund would be a better option for investments in the non-stock funds.

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

Tom Crowley


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The legal stuff: This information is for educational purposes only! This is not advice or are commendation. 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.

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