Sunday Update: 17 September 2017

Current Allocation: 100% G Fund

I started off last week’s post talking about the importance of a trading method and having a plan for when the market does not go in the direction you expected.  The timing couldn’t have been better…  Clearly the market did not go as I expected so, what’s my plan based on the new data?  See below. 

This was a significant week for the market!  The S&P500 (C Fund) closed above 2500 on Friday at a new all time high of 2500.23.  In the big scheme of things, nothing has changed.  We are still nearing the top of the 5 leg in the rally since 2009 (see the 10yr chart below).  Long term market risk is very high.  The chart below is what the next several years may look like.

What has changed is the shape of the 5th leg itself, early 2016 to present (see the 2 yr chart below).  The new high this week means that the top of the 3 leg is not yet in place.  I still want to see a consolidation before another significant push higher into 2018.  It looked like that consolidation had begun 5 weeks ago but this week’s new high likely invalidates that count. We may see a little more upside before a consolidation but it’s not worth the downside risk in my opinion.  The chart below is a guide for what the next several months may look like.  

  Short Term

The short term chart below looks pretty strong.  After breaking back above the 50DMA, a short consolidation, and a breakout this past Monday, we could see the C fund move higher in the short run.

Long Term

C fund long term charts are explained above.

The S fund did not close above the prior high in July.  If the S fund rolls over from here then the 4 leg consolidation is still in place.  The S fund is worth watching closely over the coming week or 2 in relation to the C fund.

The I fund gapped up this week but then reversed.  While it has been the best performing of the TSP funds this year, the I fund has been over bought in terms of the RSI indicator.  When it does roll over, it could drop pretty quickly…

The bottom line is, my plan has not changed.  I am still looking for a consolidation before we push higher into early 2018.  I am looking for a consolidation down to/or near the 200DMA before getting back into the stock funds for the next rally.  Obviously the best laid plans don’t survive first contact so stay alert…

Have a great week!

Jerry