It was a tough week for the TSP stock funds.  While all 3 were up for the week, all three sustained seriously reversals by week’s end.  The C fund finished up 0.52%, the S fund up 1.14%, and the I fund up 0.37%.  Daily/weekly prices moving up is great but, in the long run, the pattern shows us when and where to focus so we can manage risk and maximize gains.  

Long Term

The 2 year weekly chart of the C fund below gives us a good view.  This week’s reversal is not a good sign.  We wanted to see a follow thru from last week’s bounce off of the trend line.  Unfortunately we got a reversal instead…  Based on the weekly chart, it looks like the next move is lower from here, at least a test of the trend line.

Short Term

The weekly reversal pattern above would indicate lower prices going forward.  What about the short term, and what other tools indicate prices are going lower?  We’ve talked about Elliott Waves quite a bit and it’s one of my favorite tools.  Click here for an Overview of Elliott Wave Basics.  What do Elliott Waves tell us about the short run?

The market progresses along in a 5-3 pattern.  An impulse leg is 5 steps and the corrective leg is 3 steps.  Just this very BASIC level of knowledge can put the chart below in perspective.  We see 5 steps down from the high in January followed by a 3 step correction to the March high.  Then 5 steps down into early April and a 3 step correction into this week.  Since the trend moves in the direction of the impulse waves, the market SHOULD continue lower from here.  This is very basic and not the only possibility but its a good place to start.  Take a look at the chart below and try to let the pattern sink in… 

Now that we have an idea of what the Elliott Waves are projecting, how do the basic technical analysis tools support (or rebut) this projection?  The 4 month daily chart of the C fund below includes the 50DMA, 200DMA, volume, MACD/Stochastic and RSI.  On Tuesday the market gapped up thru the 50DMA but on low volume.  By Friday, the market had rolled over and closed below the 50DMA on higher volume.  This means trading is heavier as prices are declining; not a good sign.  MACD/Stochastic and RSI are all in the early stages of rolling over again.  The technicals seem to support lower prices from here…

There was a lot in there and it got pretty technical.  If you have questions, hit me up in the comments or on FaceBook.  Watch the 200DMA this week.  Support there is going to be critical!

Have a great week..

Jerry