Stocks were uncharacteristically down, but basically flat, the day before Christmas weekend, a day that has an historically positive bias. The Dow lost 28-points and while the indices were down 3 of the last 4 days, it was a positive week for stocks last week. [TABLE="align: center"]
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There's not too much going on this week although there was a story about a warning to U.S. troops stationed in Norway to be prepared for a coming war. “I hope I’m wrong, but there’s a war coming,” Gen. Robert Neller told them. What this means for the markets, I don't know, but with the tax cuts now a reality and the possibility of more profit taking on that alone, perhaps it could add a little heaviness to the indices before we head into the new year.
The day after Christmas has a very positive seasonal bias, but Friday did as well, so there are no guarantees. This is now a short week and the chart below shows that stocks have actually struggled during the last couple of days of the year in recent years, and into the New Year. The New Year has the propensity to have big moves - some negative, some positive, so there's some guesswork involved in which way a new year begins.
Going back 21 years to 1997, the last day of the year (6-15) and the first day of the new year (9-12) have negative records, while the 2nd to last day (11-10) has a positive record but a 4 - 8 record in the last 12 years. The 2nd day of the New Year has the best record of the bunch with 13 gains and 8 losses.
The SPY (S&P 500 / C-fund) continued to drift sideways after last Monday's gap up rally. The action filled that open gap and that could mean it is ready to resume the upside, especially since there is some rising support underneath the current levels, but a test of the prior high (just below 266) is also a reasonable expectation for a pullback if stocks continue to consolidate this week.
The weekly chart is interesting because it shows how far this rally has come, and where it has ended up. The S&P has been up for 5 straight weeks and 15 of the last 18 weeks. Other stretches like this were met with well deserved breaks by the market and while we may not see a dramatic correction, we can probably expect at the least some consolidation / sideways action like we saw after those prior positive stretches outlines on the cart. Only the sell-off before the 2016 election fell outside of the current rising parallel channel and a 4% pullback, which is really nothing historically, would have the SPY testing the lower end of the channel.
The small caps / S-fund also moved sideways following Monday's rally, and also filled it's gap. This chart looks pretty good but there's always a chance that it could try to test the bottom of that channel near 1340 before breaking out.
The EAFE Index (I-fund) rallied to new highs on Friday and the dollar looks like it may want to go lower, which is a plus for this fund. That large gap remains open and always a possibility for a fill before moving higher.
The AGG (bonds / F-fund) broke down last week and it is now testing the resistance from the bottom of that old support line. It wasn't a straight line but we've been expecting bonds to underperform with the Fed on pace for more interest rate hikes next year.
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
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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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There's not too much going on this week although there was a story about a warning to U.S. troops stationed in Norway to be prepared for a coming war. “I hope I’m wrong, but there’s a war coming,” Gen. Robert Neller told them. What this means for the markets, I don't know, but with the tax cuts now a reality and the possibility of more profit taking on that alone, perhaps it could add a little heaviness to the indices before we head into the new year.
The day after Christmas has a very positive seasonal bias, but Friday did as well, so there are no guarantees. This is now a short week and the chart below shows that stocks have actually struggled during the last couple of days of the year in recent years, and into the New Year. The New Year has the propensity to have big moves - some negative, some positive, so there's some guesswork involved in which way a new year begins.
Going back 21 years to 1997, the last day of the year (6-15) and the first day of the new year (9-12) have negative records, while the 2nd to last day (11-10) has a positive record but a 4 - 8 record in the last 12 years. The 2nd day of the New Year has the best record of the bunch with 13 gains and 8 losses.
The SPY (S&P 500 / C-fund) continued to drift sideways after last Monday's gap up rally. The action filled that open gap and that could mean it is ready to resume the upside, especially since there is some rising support underneath the current levels, but a test of the prior high (just below 266) is also a reasonable expectation for a pullback if stocks continue to consolidate this week.
The weekly chart is interesting because it shows how far this rally has come, and where it has ended up. The S&P has been up for 5 straight weeks and 15 of the last 18 weeks. Other stretches like this were met with well deserved breaks by the market and while we may not see a dramatic correction, we can probably expect at the least some consolidation / sideways action like we saw after those prior positive stretches outlines on the cart. Only the sell-off before the 2016 election fell outside of the current rising parallel channel and a 4% pullback, which is really nothing historically, would have the SPY testing the lower end of the channel.
The small caps / S-fund also moved sideways following Monday's rally, and also filled it's gap. This chart looks pretty good but there's always a chance that it could try to test the bottom of that channel near 1340 before breaking out.
The EAFE Index (I-fund) rallied to new highs on Friday and the dollar looks like it may want to go lower, which is a plus for this fund. That large gap remains open and always a possibility for a fill before moving higher.
The AGG (bonds / F-fund) broke down last week and it is now testing the resistance from the bottom of that old support line. It wasn't a straight line but we've been expecting bonds to underperform with the Fed on pace for more interest rate hikes next year.
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
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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.
