While last week it was tough to sit on the sidelines as prices climbed, this week the G fund was the place to be as stock fund prices declined.   TSP is not a day trading platform.  Stressing over daily gains or losses in your TSP account will drive you to make decisions based on emotion; never a good thing…  There are lots of ways to play this game.  For best results you need to pick one way, get very good at it, and stick with it!  Have a reason for reallocating and a plan for what you will do if the market doesn’t go the way you expected… 

Let’s start with the Very Long Term view this week and finish with the daily/actionable chart.  

Very Long Term

The C fund chart below shows how far we’ve come since the last major low in 2009, and what we may see over the next several years.  Since the 2009 low, the market has traced out a classic 5 wave pattern.  The 5th wave is getting there but does not look to be complete yet.  We need a little more consolidation over the next month or two, then a big push up into early 2018 to complete the full cycle.  Once the cycle completes, things do not look good.  The a-b-c pattern that I drew out is the ideal correction to the 2009 to 2018 rally.  It probably will not look exactly like this but, it’s good to know what the ideal pattern would look like.    

Long Term

 The long term charts of the C, and S funds are pretty similar with the S fund chart appearing to lead the market a bit.  This really helps us dial in where/when the next reallocation might happen.  In terms of the C fund chart below, ideally we would see the consolidation come down to the 200DMA (50WMA below).  The 2 leg consolidation (mid April to late June) lasted about 10-12 weeks.  We are currently 5 weeks into the 4 leg consolidation that began at the beginning of August.  Ideally, we would be at the next low by the end of October.  I’m watching the price, volume, moving averages and RSI very closely.  I would look to get into the stock funds for sure when the price hits the 200DMA/50WMA.

The long term S fund chart below has a couple more weeks in the consolidation than the C fund chart above.  The S fund MACD/Stochastic and RSI are also leading the C fund.  Keep an eye on the S fund.  When it pops up, the C fund will be close behind…

The I fund is on it’s own program.  With the price so extended beyond the 50WMA it could see a big drop relative to the C and S funds in the 4 leg consolidation.  The I fund has been out pacing the C and S all year but looks to be possibly running out of steam.

Short Term

The short term chart shows us in a clear consolidation.  Ideally, we still have several weeks to go as the 4 leg and 2 leg should be about equal in time.  I’m watching the RSI, volume and moving averages closely.  Sometime in late October when the RSI gets over sold and the price chart approaches the 200DMA will be the time to get back into stocks!

The next couple of months are historically very volatile for the stock market.  That’s not a problem since we have a solid plan.  If the C fund were to rally and close above 2490-2500 then I would have to reevaluate but, I don’t see that happening.  I’m looking for a pretty significant drop over the next few weeks and buying at the 200DMA.  Stay tuned…

Have a great week!

Jerry


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