It was another big week for the TSP stock funds! The C fund was up 0.96%, S fund and I fund were both up 2.19%. The market has rallied strongly following 4 consecutive down weeks. This week we’re going to focus on the 3 year weekly charts to see if anything has fundamentally changed, in terms of overall market direction, over the past several weeks.
Elliott Wave Theory and Pattern Analysis are not math; not an exact science. They are tools we use to interpret price movement and overall market direction. These tools can be VERY useful to TSP investors as the patterns are identifiable and repeat over time. BUT, again, this is not an exact science…
Below is the theoretical ideal of the Expanding Triangle. It never looks exactly that way in real life but, the current C fund pattern is about as close as you get…
The high in July may or may not be point d. If the C fund makes new highs, and hits the upper channel line, then we know the July high was not point d. We could see the C fund price waver up and down below the upper channel line for some time. Either way, for this pattern to complete, the next significant move is much lower… The good news is, once we hit point e, the consolidation will be compete and we will be set up for a huge move to the upside.
The S fund found support at its 50WMA with a strong follow thru this week. Right now, the S fund is sitting in the middle of its trading range. It could go either way from here before hitting resistance at its upper or lower channel line.
The I fund also found support at its 50WMA and has exploded higher over the past 2 weeks. The last 2 times the I fund hit this price level it rolled over. We’ll have to see what happens over the next several weeks. If the I fund can break above 67, it will likely make a run to the prior high from January 2018
Bottom Line: The market is consolidating, both in the long term and the short term. The C fund has been forming a long term consolidation pattern since early 2018. The S and I funds have been forming short term consolidations since early to mid 2019. The price action over the past several weeks, both up and down, has not fundamentally changed the direction of the overall market. It takes time for these patterns to play out.
As the C fund is still flirting with point d in the pattern, I will continue to utilize the G fund to protect against the eventual (?) e leg. This is NOT a recommendation. This is how I am currently allocated based on my analysis of current market conditions and my personal risk tolerance.
Have a great week!