Sunday Update: 22 July 2018

It was a week of consolidation and potentially the beginning of a short term pause in the rally.  For the week, the C fund was flat at +0.02%, the S fund at +0.27%, and the I fund leading the week with +0.41%.  Last week we focused on the long term charts to get a sense of perspective.  This week we’re back to the short term charts, looking for a sense of what’s coming in the near term.

The beauty of charting is the fractal nature of the patterns.  We see the same patterns whether we’re looking at a 100 year chart where each line is 1 year, or a 10 minute chart where each line is 5 seconds.  The same rules apply.  You just need to know the time frame that best applies to your trading methodology.  For TSP, weekly charts are best because of the 2 trades per month rule.  Having said that, looking at longer and shorter timeframes can give us an insight into how those weekly charts might play out.

Very Short Term

Below is a chart of the S&P500 (C fund).  This is a 2 month chart where each line represents 2 hours.  While this time frame is way too short for TSP investors in terms of actually reallocating, it does give us an indication of where the market is likely to go in the short run.  We see a diamond shaped consolidation from 25 June thru early July followed by a nice rally.  We just completed an ascending A-B-C-D-E pattern, which is USUALLY bullish.  In this case, it looks like the pattern has failed.  The price dropped and closed below the lower trend line in the last 2 hours of trading on Friday.  Combine that with high negative volume and indicators trending down, and our expectation is for the market to start the week lower.  Ideally we’ll find support at 2790, the highs from the week of 11 June.

Short Term

Below is the 8 month daily chart of the C fund.  We can still see the A-B-C-D-E pattern playing out but it’s in a different context in this timeframe.  Here it shows the rally losing steam just above the prior high from mid-March.  Again, the indicators look to be rolling over and negative volume is higher than recent positive volume.  This daily chart, like the 2 hour chart above, indicates the market will likely move lower next week.  While support on the chart above was 2790, support on the daily chart below is the 50DMA at 2751.  

Below is the 6 month chart of the S fund.  As you can see, there is a clear ceiling at the 1460 level and some pretty good support at the 1440 level.  This is a pretty bullish pattern in general.  IF we see a pop thru 1460 next week, it could go much higher.  If the pattern fails, the next support level is the 50DMA.

The I fund had the most constructive week of the 3 TSP stock funds, with a very strong day on Friday.  Having said that, it’s about to bump up against serious resistance at its 50DMA then its 200DMA.  Because we saw the Death Cross in early July, the I fund has some serious headwinds ahead.  The technical indicators look good so, I’m cautiously optimistic…

I’m expecting to see a bit of a pull back next week.  Ideally we’ll see support at the 2790 level, if not, we could see a drop to the 2750s (50DMA).

Have a great weekend!

Jerry