To say the least, it’s been a rough start to the week for the TSP stock funds.  The goal of this post is to gain some perspective and understand the possibilities for the next several months.  In the LONG TERM, the current pattern is almost certainly bullish.  It is a consolidation pattern that, once resolved, will very likely lead to new all time highs.  Having said that, the short term (next several months) will likely be extremely volatile with prices moving significantly lower.  This post will look at the most likely possibilities of how this consolidation pattern could play out.  

Possibilities 

1. Expanding Triangle Pattern

The expanding triangle pattern is very frustrating.  It is formed by higher highs AND lower lows.  You see it on the chart by the upward trending upper trend line and the lower trending lower trend line.  An expanding triangle plays out in a-b-c-d-e.  IF this pattern comes to pass, there are 2 short term possibilities.  First, we could get a quick rally over the next few days/weeks to the upper trend line before the market rolls over hard.  Second, last week’s top could be d and the market could continue lower to e.  * If we get a rally over the next week or 2, don’t get sucked into it… *

2. Inverse Head and Shoulders Pattern

The Inverse Head and Shoulders pattern is very bullish.  In this case, the left shoulder would be the early 2018 low at point a.  The Head would be the December 2018 low at point c.  The right shoulder would be a low around 2550-2650 (the 50% or 61.8% fibonacci retracement level).  If prices fall to +/-2650 and then reverse higher, the head/shoulds pattern is likely in play.

Bottom Line:

1. We COULD see a rally to the upper trend line over the next week or two.  If this happens, don’t let your guard down.  We are not out of the woods yet.

2. We are very likely to see prices move significantly lower over the next several weeks/months.  Best case is that prices find support at the 50% or 61.8% fibonacci retracement level.  That is a potential time to get back into the stock funds.  Worst cast, the market falls to e (approximately 2200).  

3. A fall to 2650 is about a 8% loss from current levels.  A fall to 2200 is about a 24% loss from current levels.

THIS IS NOT AN EXACT SCIENCE!  It’s possible that prices rally to 3000, or even a bit higher, before point d is completed.  It’s going to be an exciting summer!  Buckle up…

Jerry