An increasing inflation rate and the possibility of aggressive rate tightening took the spotlight with the S&P 500 closing the week lower at 4271. The price action was unusual as we had three days of one percent or more moves, causing the S&P 500 to cross up and then down through two key Moving Average (MA) levels. Monday started and finished with the S&P 500 below its 50 day MA, which was below its 200 day MA (200>50>$). Tuesday was bullish with the S&P 500 gaining 1.61% and the S&P 500 crossing above its 50 MA, but short of the 200 MA (200>$>50). Wednesday the S&P 500 took a breather and finished flat. Thursday started with the S&P 500 opening 30 points higher than Wednesdays close, and immediately crossed above that second key level, the 200 MA ($>200>50). Seeing that upward price action was encouraging, but it only lasted about one hour. The S&P 500 then gave back the majority of Tuesdays gains, crossed below both of the MAs (200>50>$), but did finish higher than Monday and up for the week. Then Friday came in and the S&P 500 continued Thursdays downward price action and closed at 4271, near session lows. So where do we go from here? From a technical perspective, the reversal of the S&P 500 to the 200>50>$ phase was not bullish. Additionally, the S&P 500s Performance Ranking has now dropped into negative territory. Given Fridays drop, the S&P 500 may want to test the 24 February intraday low of 4114. If it breaks below, the next support level would be the May 2021 low of 4056. On the other hand, our 2021 year end write up stated that Looking at the seasonalcharts.com 4 year election cycle chart, the Mid-Term election year (2022) is characterized by choppiness and lower returns. That choppiness seems to ring true as the S&P 500 has been range bound between 4114 and the 4 January intraday record high of 4818. Weve also seen 39 daily moves of more than one percent, two higher than all of 2019. Given this scenario, for TSP TIPS we recommend a further reduction of the C fund allocation to the following.
An increasing inflation rate and the possibility of aggressive rate tightening took the spotlight with the S&P 500 closing the week lower at 4271. The price action was unusual as we had three days of one percent or more moves, causing the S&P 500 to cross up and then down through two key Moving Average (MA) levels. Monday started and finished with the S&P 500 below its 50 day MA, which was below its 200 day MA (200>50>$). Tuesday was bullish with the S&P 500 gaining 1.61% and the S&P 500 crossing above its 50 MA, but short of the 200 MA (200>$>50). Wednesday the S&P 500 took a breather and finished flat. Thursday started with the S&P 500 opening 30 points higher than Wednesdays close, and immediately crossed above that second key level, the 200 MA ($>200>50). Seeing that upward price action was encouraging, but it only lasted about one hour. The S&P 500 then gave back the majority of Tuesdays gains, crossed below both of the MAs (200>50>$), but did finish higher than Monday and up for the week. Then Friday came in and the S&P 500 continued Thursdays downward price action and closed at 4271, near session lows. So where do we go from here? From a technical perspective, the reversal of the S&P 500 to the 200>50>$ phase was not bullish. Additionally, the S&P 500s Performance Ranking has now dropped into negative territory. Given Fridays drop, the S&P 500 may want to test the 24 February intraday low of 4114. If it breaks below, the next support level would be the May 2021 low of 4056. On the other hand, our 2021 year end write up stated that Looking at the seasonalcharts.com 4 year election cycle chart, the Mid-Term election year (2022) is characterized by choppiness and lower returns. That choppiness seems to ring true as the S&P 500 has been range bound between 4114 and the 4 January intraday record high of 4818. Weve also seen 39 daily moves of more than one percent, two higher than all of 2019. Given this scenario, for TSP TIPS we recommend a further reduction of the C fund allocation to the following.