Sunday Update: 01 September 2019

It was definitely a pre-holiday, late summer kind of week for the TSP stock funds.  Volume was relatively low, meaning not many shares were traded going into the long Labor Day weekend.  Volume and volatility should pick up over the next couple of weeks.  For the week the C fund was up 2.79%, S fund up 2.08%, and I fund up 2.02%.  

While gains for the week look good, looks can be deceiving when viewed from the perspective of the chart patterns… It’s important to understand the charts from multiple time horizons to put these weekly gains in perspective.  We are going to take a look at a very short term chart of the C fund, a long term pattern analysis, and finally the yearly charts of all 3 TSP stock funds.

Very Short Term

As you can see in the chart below, while the C fund was up over 2% for the week, nothing changed in terms of the short term consolidation pattern.  We still have serious resistance at 2940 as well as support at about 2825.  Consolidation patterns tend to resolve in the direction of the prior trend.  In this case, that would imply that prices move lower once this consolidation is complete.

Long Term

The long term pattern has been developing for over 18 months.  The “ideal” expanding triangle consolidation pattern is shown below.  The C fund could get all the way down to the lower channel line to complete the pattern but it is not necessary.  Any closing price below the December 2018 low is a good time to start buying back into the C fund.  While the pattern calls for about a 25% decline in the short term, once complete, we should see a huge advance (about 50%) to new all-time highs!  

Yearly Perspective  

The C fund had a strong week, once again testing its 50DMA.  The C fund has upper resistance at its 50DMA and the May high at 2950.  While we could see a move higher next week, there is a LOT of upside resistance pushing down on C fund prices.  The next support level for the C fund is the 200DMA at 2800 and the June low at about 2735.

The S fund has been consolidating just above its 200DMA.  Within the consolidation, each high is lower and each low is lower.  This is not a good sign for the S fund going forward.  Once the S fund gets below the 1325 level, there is no more support in the chart until 1125 (the December 2018 low).

The I fund has been consolidation around its 200DMA.  While we saw a breakout on Friday, I don’t expect the I fund to move much higher from here.  Best case is a run up to its 50DMA before rolling over. 

Bottom Line: Market risk is extremely high from a technical analysis perspective.  The market never goes up or down in a straight line but, the next 6 months are likely to be very ugly…  The good new is, once wave 4 is complete at e, wave 5 will be a huge move to the upside!  

Please post questions in comments or email.

Have a great Labor Day Weekend!

Jerry