Sunday Update: 07 April 2019

It was another great week for the TSP stock funds!  The C fund was up 2.06%, S fund up 2.48%, I fund up 2.14%, and F fund down 0.38%.  The charts are looking very strong.  We’ll look at the long term C fund first for a little perspective, then look at what the Elliott Wave Count says about this most recent correction period, and finish up with the daily TSP fund charts.

Long Term 

When there is a lot of volatility in the market it’s very helpful to keep in mind where we are with respect to the long term trend.  We’ve seen some BIG price swings since the January 2018 top.  The December 2018 lows took us down to test the 10 year trend line.  “The trend is your friend” as they say.  As long as we stay north of this line, in the long term, your TSP account grows if you’re invested in the stock funds.  

A Quick Lesson In Elliott Wave

Elliott Wave patterns consist of Impulse and Corrective waves.  Impulse waves, whether in a bull or bear market, move the price further in the primary direction in 5 legs.  Corrective waves are a pause in the primary direction and correct the price movement in 3 legs.  Over time, patterns within patterns can be seen.  The 3 year weekly chart of the C fund below is a great example of patterns within patterns of the long term correction we are currently experiencing.  There are no 5 leg patterns to be seen in the chart from the January 2018 top to January 2019.  This has been a year long correction with no Bear market impulse (5 leg) waves.  What this tells us is that the market is likely to go higher from here once it clears this correction.  In the short term, the market is over bought.  Prices have come too far too fast from the December lows.  We need a minor correction soon but, in the long term, I don’t think we get lower than the December 2018 lows anytime soon… 

Short Term

In the short term the market is over bought and beginning to show signs of fatigue.  The pennant pattern that has been forming since late February is bearish.  If/when prices close below the lower short term trend line, expect a decent little correction; possibly down as low as 2625.  

This S fund chart below is a great example of Elliott Wave and moving average lines at work!  We see the September to December A-B-C correction with the minor a-b-c correction in the middle.  You can see the symmetry as the distance from the September top to A is about the same as B to C.  The most recent a-b-c correction was supported by the 50DMA and has broken out to new short term highs.  This is a great chart.  We should expect a significant move higher from here.

The I fund has been in a pretty identifiable channel since early February.  It’s chart looks very strong at this point.

Bottom Line: We are looking very good in the long term.  In the short term, the C fund really needs a pull back but the S fund is set up to move higher for the next several months.  I would use any short term correction as an opportunity to get further invested in the stock funds.  The next major hurdle will be a weekly close above the October 2018 high.  Once that happens, this rally that began in Dec 2018 could really pick up steam.

Have a great week!

Jerry