Current Allocation: 34% C Fund, 33% S Fund, 33% I Fund
This week’s newsletter is very positive but, there are on-going world events that could change the game. Most pressing is the French election, taking place on Sunday. There are also some technical concerns. While prices have been going up on all 3 stock funds since the gap up 2 weeks ago, the volume of shares being traded is somewhat subdued. Even in the case of the I fund that hit new all time highs this week, volume was lacking. Having said that, I’m pretty optimistic…
The TSP stock funds look like they are on the verge of launching higher from here. It hasn’t happened yet, but many of the pieces appear to be falling into place. We’re going to focus on 2 charts that make me think the market is going significantly higher. The first is the 6 month daily chart of the S&P500 (C Fund). The second is the 15 year monthly chart of the I fund.
The C fund is carving out what is known as a “Cup & Handle” formation. You can see in the chart below that the C fund ran up to 2400 before beginning a shallow correction over 2 months (the cup), and has been trading sideways in a tight range for the past week and a half (the handle). The Cup & Handle formation is usually a very positive pattern. In this case, we need to see the price jump above the 2400 level to begin a new short term break out.
15 Year I Fund
The I fund has been on a tear since the beginning of the year but, this week, it closed above 65 for the first time. The I fund hit 65 at its peak in 2007 before sustaining a major correction into 2009. For the last 8 years it’s been making a come back, with tests of the 65 level in 2014 and 2015. This is a monthly chart so, we want to see the closing price above 65 at the end of May. We will likely see some bobbles but, the I fund is now free to run higher.
The long-term chart of the C fund looks great. We came off a 2 month correction that took us from testing the upper channel line down to about the middle of the channel. The gap up 2 weeks ago looks to be the beginning of a significant move. We just need a weekly closing above 2400. After that, the next resistance should come as the price chart hits the upper channel line (possibly by June).
The S fund chart is pretty similar to the C fund chart but a little more volatile. Following the gap up, the last 2 weeks have been pretty interesting for the S fund. Last week the S ran way up but, by the end of the week, was back to where it had started. This is called a weekly reversal and is not a good sign. This week, the S came down and filled the gap before running back up to where it had begun the week. This is called a weekly hammer and is a very positive sign. If next week is strong, the S goes higher from here.
The I fund had a giant weekly move, pushing to new all time highs. With such a strong breakout, the I fund is likely to continue higher for some time.
Even though we are getting into May and summer is right around the corner, there is a lot going on in the world. I expect we move higher into the summer but, beyond that we’re on borrowed time…
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