After eight straight positive closes for the S&P 500, stocks took a little break yesterday (Tuesday) and we saw a modest decline. The Dow gave up 55-points and now we head into the final trading day of 2014 and the indices have some annual gains to protect.
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The I-fund lagged as European markets and particularly the Asian markets, all lost ground. The F-fund posted a small gain.
The last few days of the year, and the start of the New Year have a decent long-term record, but in more recent years the last day of the year has struggled. There can also be some very big moves during to start a New Year and being on the right side of the market tends to set the tone for the year so it's kind of an important decision which funds you're in to start the year. I'll post some data below and you'll see what I mean.
The SPY (S&P 500 / C-fund) remained above the red neckline of the inverted head and shoulders pattern for a third straight day, and Tuesday's lows actually tested the old resistance which may now be a support line. I see what could be a smaller inverted head and shoulders pattern (blue) forming within the right shoulder of the larger inverted head and shoulders pattern (red.) In theory, this is a bullish formation, but I guess the smaller right shoulder could see more downside. In order for that to happen however, the red neckline would have to breakdown, and that would set up some bearish possibilities.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) gave up 0.43% on Tuesday but it also found support in a good place. So far the two breakout levels have held up and as long as that is the case, we should be bullish on small caps. But one slip here and we'd have to reconsider the situation.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) is backing off again from key resistance and this fund is looking bad. There is a small open gap down near 61 and perhaps filling that is its downside target, but that would be optimistic.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Today is trading day number -1 on the New Years Day Performance Chart, and historically it has been a decent day. The first day in the New Year can be a little flaky but the second day is actually one of the strongest positive biases of the year... although not recently.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
This data shows how poor the last day of the year has been in the last 18 years, although it has been positive over the last two years. The first day of the New Year has a so, so record, but it had been up for six straight years before the 2014 opening day.
The 2nd trading day of the year has had a very good historical record going back to 1950, but as you can see on the above chart there's nothing overly spectacular in the last 18 years. A few of those years were doozies with a 5.0% gain in 2001, a 3.83% loss in 2000, plus 4 other years over 1% - 3 up and 1 down. But over the last 9 years, nothing much happened on the 2nd day.
Only two times in 18 years did we see both the 1st and 2nd trading days down to start the year - 2003 and 2014.
The AGG (Bonds / F-fund) is back testing the top of it wedge formation, but this looks a lot like a cup and handle, which tends to break to the upside so this may actually be bullish for bonds. For that to happen we probably have to see further decline in stocks, so this may be leaning toward being bearish for stocks, and bullish bonds to start 2015. But it has to breakout first.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
AutoTracker: Just a reminder that if you want to get on the 2015 AutoTracker to start the new year, make sure to login to the AutoTracker by December 31 so we know you're still around. If you're new to the AutoTracker, use the instructions on this page to get started.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the Sentiment Survey Results and 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! Have a Happy New Year, and good luck in 2015! I'll be back on Friday with a brief commentary.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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.
