It was another constructive week for the TSP stock funds. After Thursday’s big move to the downside, the C fund put in a very nice bullish reversal on Friday to finish just above its 10DMA. For the week the C fund was up 0.06%, S fund up 1.03%, I fund up 0.73% and F fund up 0.77%. From a daily perspective, Friday’s price action was very bullish.

In the TSP Weekly Update Show we do a deep dive into Bollinger Bands, how to use them with Tops and Bottoms, and in combination with other technical analysis tools. We also expand the aperture and look at all 4 TSP funds all the way back to 2009. This very long term view gives us a clear picture of the median trend line and how far we still are above that line… You definitely want to checkout the show!

In this post, we’ll look at several time frames, using various technical analysis tools, to get a complete picture of the C fund. By seeing historical similarities combined with current price action, we can respond to what the market gives us…

Elliott Wave Count (Plan A)

Our long term Elliott Wave count remains as the primary count. At this point, it appears that wave IV is complete and price is forming the final wave V of this Bull Market. This is our base line case. It does not mean that price will continue higher in a straight line… There will be pull backs along the way to the completion of wave V. The next major pull back will really tell us whether or not this count is correct… A close below the February 2022 low (IV) clearly invalidates this Elliott Wave count.

Long Term with Dots

Below is the 5 year weekly chart of the C fund where each week’s closing price is the dot. The blue line is the 20WMA (Week Moving Average). By looking at a long term Dot chart, we take away all of the day to day noise and see the real underlying price trend.

This chart shows the importance of the 20WMA. When the dot is below the 20WMA line, you do not want to be in the stock funds. When the dot is above the 20WMA, you absolutely do want to be in the stock funds.

If you are a long term TSP investor who doesn’t want to look at the charts more than once per week, this is a great chart to have on your computer. Following this method, you would take some short term losses along the way but, clearly, you would capture the majority of gains while protecting against the majority of downside risk.

10DMA Pull Back Analysis

In the 7 month chart of the C fund below we take a look at failed and successful pull backs to the 10DMA. In early October 2021, price gapped up through its 10DMA, consolidated back to the 10DMA, found support and blasted higher. Since then, each attempted support at the 10DMA has failed until this Friday.

Next week will be very important to see if support at the 10DMA holds. IF support fails, we could be in for a more significant correction.

The TSP Funds

The 5 month chart of the C fund shows how Plan A (Bullish) would theoretically play out over the next several months. If the February low is the bottom of cycle wave IV then the current rally should extend to new all time highs in a 5 wave pattern.

In the short term, price should move higher to complete III (5). The pull back after that to IV will be very important! The key price level here is 4420 (I). By Elliott Wave rules, IV cannot retrace into the area of I. A pull back that takes price below 4420 invalidates this Elliott Wave count.

The S fund had a nice breakout from a horizontal consolidation on Tuesday. Price pulled back to close the gap on Wednesday and Thursday, then stabilized on Friday. A daily close below 1950 would undercut the horizontal consolidation and effectively end this rally attempt for the S fund. A close below 1800 would be the beginning of a new major leg lower.

Like the S fund, the I fund gapped up on Tuesday. It then pulled back on Wednesday and Thursday to close the gap before stabilizing on Friday. A close below 73 would indicate a failed breakout on Tuesday, HOWEVER…

The I fund looks to have completed a 5 wave impulse move higher off of the early March low. An a-b-c pull back to the 71 area would be very constructive. This would complete a wave II correction and be an excellent time to reallocate into the I fund.

The F fund had a relatively strong week as it tries to find a bottom. Unfortunately, RSI is still well below 50 and trending down. With the FED telling us that interest rates will be moving higher, there is no reason to be in the F fund at this point in the cycle.

Bottom Line

Lots of analysis here…

  1. Plan A is in place unless/until the C fund closes below IV; approximately 4100.
  2. In the big picture, the C fund has closed above its 20WMA line for the past 2 consecutive weeks (Dot Chart). We want to be in the stock funds when the C fund is above its 20WMA.
  3. In the short term, the C fund should move higher to complete III (5). Once that happens, we should expect a potentially significant pull back.
  4. A daily close on the S fund below 1950 and the I fund below 73 would be a leading indicator for the C fund’s pull back.
  5. A rally above 107.25 on the F fund would indicate that a near term bottom is in just below 106. I wouldn’t bet on that though…

Have a great week!

Jerry