Sunday Update: 27 May 2018

The market did not do what I expected it to do this week.  That’s what I get for anticipating…  Thankfully I have patterns and technical indicators to get me back in line when I think I know what’s coming next.  Rather than moving higher, the market continued to consolidate this week creating a horizontal consolidation that we’ll talk about further down.  Let’s start with a broad view and drill down to the daily charts.

Long Term

The 10 year weekly chart below helps us see the really big picture.  While it’s easy to get sucked into the day to day or week to week price movements, we always have to keep the big picture in mind.  Being on the right side of the big trends is how you grow your TSP account over time.  As long as we stay above the 2 year trend line, we’re making progress.  Once we get above the January high, we should be watching closely for a final top to this 10 year Bull Rally…

The 2.5 year weekly chart below shows a strong breakout and a tight consolidation for the past 2 weeks.  This is a positive sign as the market has not rolled over like it has following the past several breakout attempts.  A strong move higher next week would be encouraging but, as long as we don’t close below the trend line, we’re still in good shape.

Short Term

The 8 month daily chart of the C fund shows us a deviation from the pattern since the January high.  We have seen a horizontal consolidation for about the past 2 weeks.  This is the first time we’re seeing this type of consolidation in 2018.  There are no guarantees but, this is a good sign.  The market is digesting the price move since early May without selling off like it has following every other run up in 2018.  As long as we stay above the 50DMA we’re in good shape but, we should expect resistance at 2750, 2800 and 2875 levels.

The S fund also consolidated this week, just below it’s all time high from January.  A close above the 1420 level on the S fund would be a positive psychological step for the market going forward.  

The I fund is a different story.  The I fund hit resistance at the 72 level and rolled over hard, closing below its 50DMA for the first time since early April.  While the I fund tends to be more volatile than the C and S funds, we need to keep a close eye on this.  Ideally the I fund will find support at its 200DMA however, continued weakness down to the 68 level is possible.  It will be very tough for the C and S funds to continue higher with the I fund dragging lower.  Watch this one closely…  

The summer months can be tough on the markets.  While I’m optimistic that we will see higher highs in 2018, the price movement, patterns, and technical indicators will drive reallocation decisions.  If you’re going on vacation, make sure to still keep an eye on the market.  If the bottom falls out, you don’t want to get caught off guard…

Have a great Memorial Day Weekend!

Jerry