We managed to avoid a good bit of volatility in the TSP stock funds since the 8 July ALERT. We also made some decent gains in the F fund over the past few weeks. Having said that, the big gains are made in the stock funds when the overall market is trending up. With another successful test of it’s 50DMA, the C fund has told us that the market remains in rally mode.

The Charts

Yet another successful test of the 50DMA for the C fund. The 50DMA has provided support for the C fund on nearly every test since May 2020. At some point, the 50DMA will give way. When we get the 10DMA crossing down thru the 50DMA, the game will have changed. That’s not what we’re seeing now… With the C fund firmly above both the 10DMA and 50DMA, there is no reason not to be positioned in the stock funds.

There’s a lot going on in the S fund chart below. We will get into more detail in the Newsletter this weekend. It appears that the S fund put in an impulse move from the May low to June high. This move progressed in 5 legs. The a-b-c correction to the impulse move retraced down to the 61.8% Fibonacci level, and then exploded higher. A close above 2280 will ultimately confirm this analysis but, we COULD be at the beginning of a monster 3 leg…

The I fund bounced off of prior support at the 76.50 level and followed thru today. It’s down almost 4% from the high. That will give us a nice return just getting back to the previous high.

The F fund gapped up on Monday and Tuesday but ultimately put in a serious reversal. This type of gap is often seen at the top of a major move higher, like we have seen in the F fund. It’s called an Exhaustion Gap and often identifies a top. Additionally, this week was the first high volume selling we’ve seen in the F fund since April. There was clearly some rotation out of bonds and into stocks this week.

Bottom Line

You can’t fight the tape as they say… The market appears to be back in rally mode for the time being. All indicators have turned higher, the C and S funds are both back above their respective 10 and 50 Day Moving Average (DMA) lines, and the F fund put in a blow-off top and negative reversal.

What we are looking for is the end of the 3 leg in the larger Elliott Wave pattern that we discussed last week. I had hoped that last week’s drop was the beginning of the 4th leg. It doesn’t look like that’s the case so, in the short run, we should see prices continue higher. Watching closely…

Jerry