Fibonacci numbers are a very powerful tool in your technical analysis tool box. We have discussed Fibonaccis many times in Alerts and Sunday Updates. The post is a Fibonacci analysis of the C fund based on this article by J.C Parets at AllStarCharts.com. I HIGHLY recommend that you take the time to digest J.C.’s article!
The objective here is to use a Fibonacci analysis to determine a POTENTIAL top to the long term rally that began in 2009. We are going to look at a 161.8% extension and a 261.8% extension; on both a generic chart and an actual chart.
The chart below shows the very simple math necessary to calculate Fibonacci extensions. We utilize the 2008 closing high of 1561 and the 2009 closing low of 683 as the basis. As you can see, the 161.8% extension took us up to 2103.6. That target was met in 2015. Since blowing thru that level, the next target is 261.8% or 2981.6.
* The C fund closed today at 2934; VERY CLOSE to the 261.8% extension target *
Below is how the extension actually played out, on a monthly basis, since the 2009 low. It took until early 2013 for the C fund to return to the 2008 high. Once this level was surpassed, the extension target became 161.8% or the 2100 level. This target was met in 2015 and then began the A-B-C correction into the 2016 low. After this correction the market rallied again, giving us a new extension target of 261.8% or the 2980 level. We are within 50 points of that level as of today’s closing price…
Bottom Line: Fibonacci extensions are a tool. This is NOT an exact science and there are NO guarantees but, a reversal at or near the 2980 level is a real possibility…
Are you going to change your TSP Allocations soon?
Possibly. I’m watching very closely as we approach the 2980 level.
So would now be a good time to switch over to the G fund?
If you are risk averse then now would be a good time to reallocate some or all to the G fund. Having said that’s the current upward trend remains in place until it reverses..
Is 100% C looking like the right move?
The stock funds look very strong in the long term but short term, we are due for a correction. If I were in the G fund right now, I’d sit tight and wait for a correction to the 50DMA before moving back into the stock funds.