COVID numbers have increased substantially with hot spots emerging in some southern states. As such, we’ve seen a reopening reversal with states further restricting the amount of people that can gather and the amount of alcohol bars can serve. That said, it also looks like the U.S. will have increased travel restrictions to the European Union. From a technical perspective, many indicators are converging as we start this holiday shortened market week. This will be the third consecutive week that we are in that 230 point range bound channel between 3002 and 3232. It should also be noted that a breakout below or above those levels might give us insight into the future direction of the markets. With the S&P 500 closing at 3009 on Friday, we don’t have much downside wiggle room. Another negative converging indicator occurred Friday when the S&P 500 crossed below its 200 day moving average, which stands at 3020. Last week I mentioned that we were pretty much right in the middle of that range bound channel. Well this week we had a one step up, two steps down trend. On Monday and Tuesday the S&P 500 gained just over one percent. On Wednesday it lost 2.59%. On Thursday, the S&P 500 gained 1.10%. On Friday, the S&P 500 lost 2.42%. It seems eerily familiar to walking down stairs and then with the next down step we’re falling into the cellar if we breakout below 3002 and/or that 3000 emotional threshold. However, there is one bright light we can bring to this convergence. The U.S. 5-year Treasury yield dropped to a record low of 0.29% and the 3-year rate also slid to an all-time low of 0.17% this week. As yields decrease, bond prices increase and we are seeing bond funds at historic levels. For TSP TIPS, this convergence will play out with our one remaining June reallocation. We are recommending as our second June reallocation to put some cash to work in the F fund, which hit a new record high on Friday. If the S&P 500 drops below 3002 at Monday’s market close, we will then utilize our third interfund transfer (IFT) of the month and cut our allocation in the C and S funds. After the first two IFT’s, the TSP will allow a third IFT but only if you move money into the G Fund. Either way, this could be a busy week.
COVID numbers have increased substantially with hot spots emerging in some southern states. As such, we’ve seen a reopening reversal with states further restricting the amount of people that can gather and the amount of alcohol bars can serve. That said, it also looks like the U.S. will have increased travel restrictions to the European Union. From a technical perspective, many indicators are converging as we start this holiday shortened market week. This will be the third consecutive week that we are in that 230 point range bound channel between 3002 and 3232. It should also be noted that a breakout below or above those levels might give us insight into the future direction of the markets. With the S&P 500 closing at 3009 on Friday, we don’t have much downside wiggle room. Another negative converging indicator occurred Friday when the S&P 500 crossed below its 200 day moving average, which stands at 3020. Last week I mentioned that we were pretty much right in the middle of that range bound channel. Well this week we had a one step up, two steps down trend. On Monday and Tuesday the S&P 500 gained just over one percent. On Wednesday it lost 2.59%. On Thursday, the S&P 500 gained 1.10%. On Friday, the S&P 500 lost 2.42%. It seems eerily familiar to walking down stairs and then with the next down step we’re falling into the cellar if we breakout below 3002 and/or that 3000 emotional threshold. However, there is one bright light we can bring to this convergence. The U.S. 5-year Treasury yield dropped to a record low of 0.29% and the 3-year rate also slid to an all-time low of 0.17% this week. As yields decrease, bond prices increase and we are seeing bond funds at historic levels. For TSP TIPS, this convergence will play out with our one remaining June reallocation. We are recommending as our second June reallocation to put some cash to work in the F fund, which hit a new record high on Friday. If the S&P 500 drops below 3002 at Monday’s market close, we will then utilize our third interfund transfer (IFT) of the month and cut our allocation in the C and S funds. After the first two IFT’s, the TSP will allow a third IFT but only if you move money into the G Fund. Either way, this could be a busy week.