01/03/12
Happy New Year, everyone! 2011 was a wild ride that ended basically where it started. The S&P 500 finished flat (0.04 below where it started the year), while the Dow was up about 5%, and the Nasdaq was down about 2%.
The Dow lost 69-points on Friday as the market stuck with the recent trend of being down on the last day of the year, rather than the long-term trend of being positive.
For the TSP, the C-fund lost 0.42% on Friday, the S-fund was down 0.39%, the I-fund gained 0.73%, and the F-fund (bonds) added 0.11%.
For the final weekly, monthly, and 2011yearly TSP returns, please see our recent TSP Weekly Wrap-Up.
You may have noticed that the C-fund, which tracks the S&P 500, gained about 2% on the year despite the S&P finishing slightly down. That is because of the dividends paid by the companies within the S&P 500 index.
We start the new year with an interesting scenario. You can see all of the resistance currently overhead although the more often resistance is tested, the less likely it will continue to hold. But with the S&P at the top of this large triangle formation, there is more room on the downside should that resistance hold.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 50 and 200-day exponential moving averages (EMA's) are now just 3 points apart. It is certainly not an instant gratification indicator, but if / when the 50-day EMA crosses above the 200-day EMA, it will give us an official bull market signal.
I didn't want to crowd the chart too much but the inverted head and shoulders pattern is still very much alive, and a move above the December high would be a bullish breakout from that formation.
The dollar is testing its lower support and if the support does break, it will likely help the S&P 500 break above that inverted head and shoulders pattern.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
SentimenTrader.com pointed out that there were many "never seen before" developments this past year, especially since August and the latest is that this is the first time that the Dow has ever rallied at least +5% for the year while the Nasdaq Composite showed a negative return.
There were only 2 years that the Dow rose by any amount when the Nasdaq fell, 1987 and 1994. Not surprisingly, those were also years when the S&P 500 finished almost flat. Stocks performed very well the following year, particularly technology (the Composite rallied at least +20% at some point in 1988 and 1995).
Data provided courtesy of www.sentimentrader.com
Checking out seasonality one last time, the first trading day in January tends to be a mixed bag but for some reason day number 2 (+2 on the chart) has a strong positive bias. After that, any positive seasonal bias is over.
Chart provided courtesy of www.sentimentrader.com
I think 2011 gave us more evidence that it pays to manage our TSP accounts. The S&P 500 was up over 8% for the year at one point last spring, then down 11% for the year in August. Those were nice swings to try to trade if you did it right.
With the S and I-funds finishing in negative territory, and the C-fund gaining a miniscule 2%, making a few transfers at opportune times can greatly benefit your return. Of course poorly timed moves can hurt. But you can see by our final 2011 AutoTracker Standings, that many folks did much better than the market and the TSP funds.
Administrative Note: For anyone who does not currently have an account on the AutoTracker, and wants to be on it for all of 2012, you will have until tonight (Jan 3 at 5 PM ET) to get on it to start the year. Of course you can get on it after that date, but you will have a partial year return for 2012. If you already have an active account in 2011, you DO NOT have to do this. Your account will rollover to 2012, so please don't ask because I will be very busy this week with end of year / start a new year stuff. Click here for more information.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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.
