Sunday Update: 15 July 2018

It was a very strong week for the TSP stock funds and it looks like we’re going higher from here…  For the week, the C fund was up 1.50%, the S fund up 0.32% and the I fund up 0.31%.  Last week we focused on the short term charts and why the most recent breakout could be a game changer.  This week we’re going to focus on the long term charts and put some context around that breakout.

Very Long Term

For the purposes of managing and maximizing your TSP account, the longest useful time frame right now is 10 years.  2009 was the last major low in the stock market.  Since then, the market has been expanding in a classic “Elliott Wave” 5 wave pattern.  The beauty of Elliott Waves is the Fractal nature (patterns within patterns).  Within the larger pattern that began in 2009, we see the V wave expanding in 5 waves.  This is a great visual and helps us “see” where the market SHOULD be heading over the next several months.  IF this pattern plays out as expected, we will see TSP gains through 2018.  That’s the big picture expectation.  We manage the risk using the short term charts as discussed in last week’s Sunday Update.

Long Term

The 3 year weekly C fund chart below drills down into the V leg of the chart above.  The V leg began at the low in 2016 and has expanded in 5 waves.  All indications are that the C fund has completed the 4 leg and has begun the 5th and final leg in the cycle.  Again, we manage the risk utilizing the short term charts with trend lines, moving average lines, etc…

Of the 3 TSP stock funds, the S fund is leading in terms of its chart formation.  It’s chart is similar to the C fund chart BUT, the S fund is further along in its 5th leg.  Having closed higher than the 3 leg, the S fund has met the technical definition of the cycle.  The short term chart indicates that the S fund will move higher from here but it is not necessary in terms of the wave rules.  What I’m saying is that I expect the S fund to move higher in the short term, but I acknowledge that the market risk is HIGH.

The I fund chart below show that it has been lagging both the C and S funds.  This presents us with some interesting opportunities.  Since the I fund has just completed it’s 4th leg, we should expect a pretty strong move to the upside from here.  The market risk in the I fund is actually very LOW based on this chart.  If we expect the I fund to rise to 80 (for example), that’s a gain of about 18% from current levels.  If the market went the other way, a close below 66 would be a 2.5% loss.  So in terms of market risk, if you bought the I fund at 67.79, your potential upside is estimated at 18% while your downside is fixed at approximately 2.5%.  Is a 2.5% downside risk worth an estimated 18% upside gain to you?…  

I like the looks of all 3 TSP stock charts for the remainder of 2018.  Once the V leg is complete, we are in for a protracted decline.  Much more about this when the time comes but, it pays to keep that thought on your radar!

If you have read this far, I have a request… I’m taking an informal poll to get a sense of the value of the Sunday Update.  I’ve been publishing this every weekend for over a year now and need some feedback.  Please comment “Yes” on the site, Facebook page, or Facebook group indicating that you have read this week’s Sunday Update.  I’m trying to get a sense of how many people are actually reading it..  Thanks for your help!!

Have a great weekend!

Jerry