The stock funds continued their advance this week with the C fund putting in a New All-Time High! For the week the C fund finished up 1.64%, S fund up 1.36%, I fund up 0.65% and the F fund was down 0.45%. The market put in a strong advance this week but, nothing has materially changed in terms of the chart patterns. If you did not read last weekend’s newsletter, I would encourage you to go back and read it here.

This week we’ll take a look at an Elliott Wave count possibility that could result in the market moving significantly higher over the next several months. It all comes down to the September correction and how it will ultimately be labeled on the long term chart. Then we’ll look at a short term chart of the C fund that is bumping up against a series of resistance points. Finally, we’ll look at the 6 month daily charts of all 4 TSP funds.

The Extreme Bullish Case

The chart below is the C fund 2 year daily. For the past several months, we have been anticipating the top of wave III. The mild correction that we got in September could mean that wave III was complete at the early September high and wave IV was complete at the early October low. If that count is correct, we are currently in the early stages of wave V. There is another possibility…

Wave III is extended, meaning that wave III itself is playing out in 5 sub-waves. If wave III began at the low in September 2020, then it appears that the September 2021 correction was wave 4 within wave III. If this count is correct, then wave III is not yet complete. This count creates the possibility for the C fund to continue significantly higher and potentially hit the 261.8% Fibonacci extension level from the CoVid low. This target is in the area of 5367.

How will we know which count is correct? If this current rally continues in an impulse wave up to III in the chart below, then the extreme bullish case is in play. If the market rolls over and we get the Expanded Flat pattern discussed in last week’s Newsletter, then wave IV will be complete at the bottom of that pattern.

C Fund Short Term Resistance

In the 6 month daily chart of the C fund below, w see that price advanced strongly for seven consecutive days before hitting resistance at the trend line on Friday. The C fund is bumping up against 3 significant resistance points where we might expect some weakness over the next several days. First, the C fund is at a Double Top to its previous all-time high from early September. Second, the 6 month trend line had been acting as support for price since May. After the gap down through the trend line in mid-September, price rallied and tested the trend line but found resistance. Price rolled over, bottomed in early October, and is now making another attempt to get back above the trend line. Finally, price is very close to the 161.8% extension level of wave 1 of this new rally attempt. If we are going to get an Impulse Wave here, this would be a great resistance area for price to put in a sideways consolidation. If price rolls over and closes below 4450, our hopes for an Impulse Wave are down the tubes…

The 6 Month Daily Charts

The 6 month daily chart below shows what the C fund will look like if we get an impulse wave higher. A small pull back over the next few days followed by another move higher is what we want to see. The technical indicators have topped out, inline with the resistance levels described in the chart above.

The 6 month daily chart below shows what the C fund will look like if the market rolls over and we get an expanded flat to complete wave IV. An expanded flat is a 3-3-5 pattern giving us a larger A-B-C correction. Ideally, wave C would play out in 5 sub-waves and complete below A.

The S fund is butting up against its upper channel line and the technical indicators are at over bought levels. If the pattern continues, the S fund will roll over again to the lower support channel line. This would be consistent with the Bearish case for the C fund.

The I fund has been the under performer of the 3 TSP stock funds over the past 2 weeks. On a positive note, the I fund did break thru and find support at its 50DMA. The I fund still has some work to do. Like the S fund, the I fund will break out of its relative flat, long term consolidation pattern at some point…

The F fund chart does not look good. We have lower highs ever since the top in August 2020. A close below 112 would give us lower lows and confirm a long term down trend for the F fund.

Bottom Line

We are due for some resistance this week. The S fund is at its upper channel line and, if the pattern continues, will roll over this week. The C fund is at a critical juncture. If we get a shallow consolidation this week followed by an explosive move higher, then we are in good shape. If the C fund rolls over, we will likely retest the lows from early October.

We will be watching the 10DMA on the C fund closely. Ideally, any weakness this week will not take us below the 10DMA.

Have a great week!

Jerry