All of the major U.S. indexes (including the DOW Jones Industrial Average, NASDAQ, and the S&P500) closed the week at All-Time Highs! The financial media is euphoric; pointing to the Federal Reserve (FED) board meeting this week, and a universally expected interest rate decline in July, as the cause. If you look a little deeper however, Friday’s highs across the board came on the LOWEST trading volume of the year…
You can’t fight the FED and you can’t fight the trend. Until the top is in, you have to respect the up trend; but… When this over inflated market rolls over, it’s going to be ugly! For the week the TSP funds were mixed. The C fund gained 0.78%, S fund was up 0.25%, I fund was down 0.56%, and the F fund was down 0.27%.
While the major U.S. indexes hit all-time highs, the underlying indexes are still lagging. The S fund, which represents the Total Market Index, has yet to take out its prior all-time high from August 2018. The I fund, which represents the Europe, Asia, Far-East Index, has yet to take out its prior all-time high from January 2018. The best case scenario for the TSP over the next few months is if the S and I funds can creep higher and maybe take out their prior all-time highs. The C fund still has some room to move higher before hitting some serious resistance. We’ll take a look at what that might look like below.
The short term target for the C fund is 3050. This would take us to the upper channel line of the expanding triangle formation and set us up for a 20+% decline back down to the lower channel line. We may not get to 3050 in a straight line but, prices should not fall below 2950 before hitting 3050.
The S fund is also tracing out an expanding triangle pattern but on a smaller time scale than the C fund. The best case scenario is the S fund continues higher and hits its upper channel line at its prior all-time high at 1500. IF that happens, getting past 1500 will be very difficult…
On the I Fund, 2 Measured Moves (line segments of the same length) would take us to approximately 71.5 and the prior all-time high. This may not happen in a straight line, or at all. IF this pattern does play out, I would expect serious resistance at the 71.5 level.
Bottom Line: We are almost at a SERIOUS top for the TSP stock funds. There is still some room to move higher, particularly on the S and I funds. Once the top is in, the fall could be very FAST… Stay Alert!
Have a great week!