Stocks sold off on Friday, during the week which is typically part of the best stretches of the year for stocks. The action was not good. However, we're not even half the way through the Santa Clause rally period so Friday's losses were surprising, but not a deal breaker yet. We did see some late buying as the S&P 500 (-1.11%) closed well off the early lows. Small caps also closed off their lows, but the rally in yields had them lagging again.
You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
The quiet action that I had been embracing as a good thing during the holidays, turned into some volatility on Friday, but Santa isn't dead yet.
According to this Reuters article, "Since 1969, the last five trading days of the year combined with the first two of the following year have yielded an average S&P 500 gain of 1.3%, a period known as the "Santa Claus Rally," according to the Stock Trader's Almanac."
That means we're just three days into that 7-day Santa Claus Rally stretch, and after three days the return of the three TSP stock funds, C-fund, S-fund, and I-fund are -0.04%, +0.06%, +0.43% respectively. Friday did not help but it is not unusual to see some volatility late in the year.
Here is that December seasonality chart again and you can see that there can be some choppiness through the end of the year.
Chart provided courtesy of www.sentimentrader.com
But as we talked about last week, holiday light trading volume can see the indices get pushed around, especially on a major news event, and while we didn't really have a major event, the indices did get pushed around on Friday. Trading volume on was a lot lighter than it has been recently but maybe a littler heavier than a typical post Christmas trading day. It was similar to the dog days of August trading.
The NYSE also suffered a rare day on Friday that saw less than 20% of the stocks positive.
According to Jason Goepfert from sentimenTrader.com: "Never before had fewer than 20% of NYSE issues advanced on any one of the last 3 sessions of a year. It got close in 2011, which was a nice buying opportunity. Most of the other super-weak days saw a snapback in the days/weeks ahead."
The S&P 500 was up less than half the time during the next trading day, but three days later it was up 75% of the time.
Now here's an interesting take: According to Goldman Sachs, a lot of this late selling is Pension Fund rebalancing out of Equities since they must maintain a certain ratio of stocks to bonds, and after the large gains in stocks this year, they do have move back to their prospectus allocation ratios before the end of the year. So perhaps that was what Friday's selling was all about, or is there something more sinister brewing?
If it wasn't a holiday week I would be more concerned because there are definitely some cracks showing in the stock and bond charts, which may not bode well for the stock market early next year, but the bullish holiday bias is still out there.
I'm still in semi-vacation mode but I will be checking in every day.
The S&P 500 (C-fund) fell sharply on Friday but it did get a big bounce off the lows after successfully testing and holding at the 50-day EMA, but until this can recapture 6050 - 6100, the bears may continue try to put pressure on.
DWCPF (S-fund) is not only below, and finding resistance at, the descending resistance line and the 50-day EMA, it has been creating a bear flag. It did hold at the 100-day EMA (orange) during the prior pullback, and at that rising red support line (never closed below it) so there is a major tug-o-war going on here between the bulls and the bears as the apex narrows.
ACWX (the I-fund tracking index) was down 0.23% on Friday, but the I-fund was given a gain of 0.03%. It was due a positive fair value adjustment after Thursday's price and this was some pay back.
BND (bonds / F-fund) can not quite get back above that 200-day EMA as yields remain stubbornly high.
Thanks so much for reading! Happy Holidays to all! We'll see you back here tomorrow.
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
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Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
The quiet action that I had been embracing as a good thing during the holidays, turned into some volatility on Friday, but Santa isn't dead yet.
According to this Reuters article, "Since 1969, the last five trading days of the year combined with the first two of the following year have yielded an average S&P 500 gain of 1.3%, a period known as the "Santa Claus Rally," according to the Stock Trader's Almanac."
That means we're just three days into that 7-day Santa Claus Rally stretch, and after three days the return of the three TSP stock funds, C-fund, S-fund, and I-fund are -0.04%, +0.06%, +0.43% respectively. Friday did not help but it is not unusual to see some volatility late in the year.
Here is that December seasonality chart again and you can see that there can be some choppiness through the end of the year.
Chart provided courtesy of www.sentimentrader.com
But as we talked about last week, holiday light trading volume can see the indices get pushed around, especially on a major news event, and while we didn't really have a major event, the indices did get pushed around on Friday. Trading volume on was a lot lighter than it has been recently but maybe a littler heavier than a typical post Christmas trading day. It was similar to the dog days of August trading.
The NYSE also suffered a rare day on Friday that saw less than 20% of the stocks positive.
According to Jason Goepfert from sentimenTrader.com: "Never before had fewer than 20% of NYSE issues advanced on any one of the last 3 sessions of a year. It got close in 2011, which was a nice buying opportunity. Most of the other super-weak days saw a snapback in the days/weeks ahead."
The S&P 500 was up less than half the time during the next trading day, but three days later it was up 75% of the time.
Now here's an interesting take: According to Goldman Sachs, a lot of this late selling is Pension Fund rebalancing out of Equities since they must maintain a certain ratio of stocks to bonds, and after the large gains in stocks this year, they do have move back to their prospectus allocation ratios before the end of the year. So perhaps that was what Friday's selling was all about, or is there something more sinister brewing?
If it wasn't a holiday week I would be more concerned because there are definitely some cracks showing in the stock and bond charts, which may not bode well for the stock market early next year, but the bullish holiday bias is still out there.
I'm still in semi-vacation mode but I will be checking in every day.
The S&P 500 (C-fund) fell sharply on Friday but it did get a big bounce off the lows after successfully testing and holding at the 50-day EMA, but until this can recapture 6050 - 6100, the bears may continue try to put pressure on.
DWCPF (S-fund) is not only below, and finding resistance at, the descending resistance line and the 50-day EMA, it has been creating a bear flag. It did hold at the 100-day EMA (orange) during the prior pullback, and at that rising red support line (never closed below it) so there is a major tug-o-war going on here between the bulls and the bears as the apex narrows.
ACWX (the I-fund tracking index) was down 0.23% on Friday, but the I-fund was given a gain of 0.03%. It was due a positive fair value adjustment after Thursday's price and this was some pay back.
BND (bonds / F-fund) can not quite get back above that 200-day EMA as yields remain stubbornly high.
Thanks so much for reading! Happy Holidays to all! We'll see you back here tomorrow.
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
