Sunday Update: 20 October 2019

It was the second decent week in a row for the TSP stock funds.  For the week the C fund was up 0.54%, S fund up 0.66%, and I fund up 1.10%.  We’ll take a close look at the weekly charts later in the post.  First, I want to update the 2 Possibilities that were discussed back in the 30 June Sunday Update.  (It’s definitely worth going back and reading that post again!)

Very Long Term

We are in the midst of the longest expansion in U.S history!  Statistically, this rally that began in 2009 is on borrowed time.  Having said that, the chart indicates that prices will PROBABLY go significantly higher before a major correction.  The chart is presenting us with 2 possible paths to significantly higher prices.  Possibility #1 entails some pain but then an opportunity to make very big gains!  Possibility #2 gets us there more directly, with less pain, but also less opportunity for big gains.

Possibility #1  

Possibility 1 begins with the top of wave 3 ending in January 2018.  From there, a classic expanding triangle consolidation has been forming.  We need one final down leg for the pattern to be complete.  The C fund has stalled at the 3,000 level for the past 4 months.  A significant breakdown from here would likely be the beginning of leg e.  A weekly close below the May 2019 low (2750) would be confirmation.  IF this possibility plays out, prices will need to undercut the long term trend line before reaching point e/4.  Things will get very interesting…      

Possibility #2

Possibility 2 begins with the top of wave 3 ending in September 2018.  The correction from September thru December 2018 would be identified as wave 4.  In this case, the market is currently in the process of wave 5.  For this possibility to play out, the market must break above the 3,000 level and the upper channel line.  The C fund has been in a relatively tight consolidation around the 3,000 level for the past 4 months.  This set up COULD result in an explosive move to the upside.  In the short term there is still room for prices to move higher within the pattern.  Possibility 2 would be confirmed with EXPLOSIVE moves to the upside on a weekly chart.  

Long Term

The C fund has been forming a Bullish Wedge pattern for the past 4 months.  Each low is higher than the previous low BUT, each high is not getting higher.  This has been a relatively long consolidation following the explosive move from the December 2018 low.  A strong move up, with a weekly close above the July high of 3025, would get us out of this pattern to the upside.  A weekly close below the lower trend line would get us out of this pattern to the downside.  There is room in the pattern for the market to move relatively sideways for the next several weeks.  When the breakout happens, to the upside or downside, it will be very clear.

The S fund has also been forming a wedge pattern.  The S fund pattern is much weaker than the C fund because the upper channel line is angled down.  A weekly close below the lower channel line would be a serious problem.  A weekly close below the May low at 1325 would confirm the beginning of a new down leg for the S fund.

The I fund chart looks the best right now!  The I fund has had 2 very strong weeks and is just shy of its June high.  A weekly close above 67 ON BIG VOLUME would confirm a new move higher for the I fund.

Bottom Line:  The market still has some work to do before committing to one direction or the other.  This could take several more months or it could begin next week.  We need to watch all 3 stock fund charts to get an indication of overall direction.  The I fund cannot move to new highs if the C fund is rolling over to leg e in possibility #1.  

Stay tuned.  The next several months could get very interesting…

Have a great weekend!

Jerry