The Federal Thrift Savings Plan’s C Fund tracks the S&P 500 index.  The chart of the S&P 500 shows the short term trend (green line) has held once more.  This trend has held up six times since it began in early 2013.  The further the index progresses above the medium term trend line the closer we need to watch this short term trend line.  Since 2013 was the first year in the recent past to not have a summer correction, this has propelled the S&P 500 index well above its medium (middle red) and long term trend line (lower thick red).

S&P 500 index trend lines (TSP C Fund)

Once the S&P 500 index breaks below the short term trend it has little technical support and a rapid and significant correction should be expected.   The red arrows represent the typical summer/fall weakness seen in the market.  Note that in 2013 the market continued to trend higher during the summer, but it did return to its spring highs in the fall.  We are currently in the weak season for the stock market and I expect to see an additional correction in the market in the late summer/fall that will provide a better buying opportunity.  If the current rally fails to establish a new high, this will be the first indication that the short term trend may fail soon.  TSP Smart Investors should also be concerned by elevated current market valuations only surpassed by the 2000 stock market bubble.   The market is currently stretched and reducing allocations to equities during this rally is our risk mitigation advice.

Categories: TSP Charts