Sunday Update: 30 September 2018
Given the political theatrics on Capital Hill this week, the market still didn’t give back much of its recent gains. For the week the C fund was down 0.54%, the S fund down 0.78%, and the I fund down 0.95%. There are some important short and long term trend lines being tested on all 3 stock funds. For the time being however, the rally drives on…
The 3 year chart below shows the C fund sitting about 4% above it’s trend line. The C fund moved from 2700 to over 2900 this quarter, a gain of about 8%, and took out the January high. That’s a huge move compared to the 3rd quarter in 2016 or 2017. With positive weeks coming in on high volume and negative weeks on lower volume, this rally just keeps on moving.
The 10 month daily chart below keeps our short term trend lines a little tighter. As long as the C fund continues to rally higher off of the trend line that began in July, we’re good to go. When this line is violated, the longer term trend line will be the next target.
The S fund has been consolidating for the past several weeks. It’s sitting about 2.5% above this long term trend line. If the S continues lower from here, support at this line will be critical for the rally going forward. With the technical indicators rolling over, it is certainly possible that we could see a test of this line over the next few weeks.
In the short term, we definitely want to see support hold at the current level. There is pretty strong support at the 1470 level from the last triangle consolidation. A break down thru this level would be a short term red flag. With the Wm%R turning up on Friday from over sold levels, we could see support hold and a pop to the upside next week.
The I fund is hitting resistance at its 50 Week Moving Average (WMA). It needs to get above this level to start its next leg higher. We want to see the 50WMA acting as support, not resistance…
In the short term, the I fund could not push thru its 200DMA. Ideally it will find support at its 50DMA, pop higher and break thru the 69 level. This would be very bullish for the I fund and a great time to reallocate into it. With that gap down on Friday and indicators rolling over, it’s too early to tell what will happen with the I fund next week…
It was a bit of a down week but no major flags. October begin next week and it’s an historically notorious month for the stock market. Be prepared for some serious volatility but, as long as the long term trend lines hold, we should be in good shape over the next several months.
Have a great week!