It was another extremely volatile week for the TSP funds. In the end, much like we’ve seen since last November, the C fund found support at its 50DMA and continued to new all-time highs. For the week, the C fund finished up 1.96%, S fund up 3.39%, I fund up 1.15%, and F fund up 0.27%. As we explained in this week’s Alert, the current S fund set-up COULD be a blast-off point. There are no guarantees BUT, the analysis below is compelling…

The S Fund

The S fund far outpaced the C fund for most of the CoVid recovery. From the bottom in March 2020 to the top in February 2021, the S fund saw a 150% gain! Since then, the S fund has been in a sideways consolidation. It is POSSIBLE that this long term consolidation has come to an end…

The 1 year chart of the S fund below shows the last part of the run-up and the current consolidation. The consolidation has played out in an A-B-C-D-E pattern that ended at the low in mid-May. Each leg of the consolidation was corrective in terms of Elliott Wave. The first Impulse wave we see is from the low in Mid-May to the top in late June. This wave played out in 5 legs, making it the first impulse wave since the larger consolidation began.

IF (and it’s a big if) this analysis turns out to be correct, then we should see the S fund explode higher from here… There is a great deal of pent up energy in this consolidation. A move higher should be explosive once we clear the 2250-2300 price area. If this analysis does not play out, we will see that too and act accordingly.

To further support this possibility, we added Fibonacci retracement levels to the 6 month daily chart of the S fund below. You can see the impulse wave labeled 1-2-3-4-5 (1) and the corrective wave labeled a-b-c (2). The corrective wave completed right on the 61.8% retracement level; a classic target for a 2 wave correcting a 1 wave advance.

This pattern is text book perfect BUT, there are no guarantees that it will play out… A close below the 2 wave low at 2140 completely invalidates this wave count. On the other hand, an impulse wave to new highs would confirm the analysis. You should be watching very closely!

The Daily Charts

After a very rough Monday, the C fund found support at its 50DMA and exploded to new all-time highs. The 50DMA is clearly the line to watch. As long as the C fund stays above its 50DMA, you want to be in the stock funds. After several months of decline, it looks like the Silver Cross Index (SCI) is turning the corner. This is a great sign for the C fund going forward.

The S fund found support above its 50 and 10DMA lines after Monday’s reversal day. We would like to see these support levels hold but, I will give the S fund some room here. We could see a pull back over the next few days. Hopefully nothing lower than 2160…

The I fund found support at its prior support level of 76.50. The I fund has been in an A-B-C corrective pattern since its high in mid-June. If the C and S funds rally here, the I fund should continue higher as well.

The F fund continues to ride its 10DMA higher. If you are not sure about the stock funds at this point, the F fund is not a bad alternative as long as interest rates continue to fall. Volatility on the F fund this week was all centered around movement on the 10 year treasury yield. Given the ECB Chairman, Christine Lagarde’s statement this week, government will continue to provide liquidity to the markets and yields should continue lower. All good for the F fund.

Bottom Line

The stock funds are back in rally mode. The 2 big indicators I’m watching are the 50DMA on the C fund and an impulse wave playing out on the S fund over the next several weeks. As we discussed in last week’s Newsletter, the next real target for the C fund is 4600.

Have a great week!

Jerry