Happy New Year, everyone! This month marks the 10th anniversary for TSP Talk. It was January of 2004 that we posted the first daily market commentary here. Thanks to all of you who have stopped by over the years, those that have helped spread the word, and especially our Forum and Premium Service members! It has been a wonderful journey. Now let's get started with year #11.
The year ended with seasonal strength with some fireworks in the last hour of trading as money managers were working on their window dressing for the annual reports. The Dow ended the day up 72-points with solid gains in most indices while bonds backed off from resistance.
[TABLE="width: 80%, align: center"]
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[TD="width: 300"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 163"]
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[TD="width: 83, align: right"] G-Fund:[/TD]
[TD="width: 80, align: right"] +0.0063%[/TD]
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[TD="width: 83, align: right"] F-fund:[/TD]
[TD="width: 80, align: right"] -0.12%[/TD]
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[TD="width: 83, align: right"] C-fund:[/TD]
[TD="width: 80, align: right"] +0.40%[/TD]
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[TD="width: 83, align: right"] S-fund:[/TD]
[TD="width: 80, align: right"] +0.42%[/TD]
[/TR]
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[TD="width: 83, align: right"] I-fund:[/TD]
[TD="width: 80, align: right"] +0.11%[/TD]
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[TABLE="width: 69%, align: center"]
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[TD="align: right"] [/TD]
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The final returns for December and 2013 were quite impressive. The annual returns have probably surprised even the most bullish, optimistic investors.
The S&P 500 (SPY) ended the year on a new high, but sometimes the action pre-holiday, can be turned around post holiday, although that trend isn't as prevalent when we head into January.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The longer-term chart shows that the S&P 500 broke to the upside of a rising wedge (red) back in October, and since then the top of that wedge has held as support while another rising wedge (blue) started to form. Now it is at the top of that range. Is it possible for the market to continue without digesting some of these massive 2013 gains?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Russell 2000 is also at the top of a trading range, and it has recently created a possible bull flag, which tend to break to the upside. That is the battle small caps face as we enter the new year.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Today (Thursday) is day +1 on this seasonality chart surrounding New Years Day.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
Here is another look at the January seasonality chart. Friday is trading day #2.
Chart provided courtesy of www.sentimentrader.com
In case you missed it on Tuesday, I did a little research to see how accurate it is. The theory of the January Indicator is that: As goes January, often so goes the entire year. Here's some numbers going back to 1990.
- From 1990 to 1999, 8 of 10 Januaries correctly predicted the annual outcome of the S&P 500. That is, if the S&P 500 was positive in January, then it also ended positive for that year. If the S&P 500 was negative in January, then the annual return was also negative. So it was correct 80% of the time in the 1990's.
- From 2000 to 2009, it wasn't quite as impressive. Only 6 of 10 Januaries correctly forecast the annual return.
- From 2010 to 2013, 2 of 3 Januarys were correct and one year ended exactly flat. If you use the C-fund price instead of the S&P 500 for that flat year, then it was correct 3 of 4 times.
- So from 1990 to 2013, 17 of 24 Januarys correctly predicted the positive or negative return for the S&P 500 (or C-fund) of that year.
- There were 9 negative Januaries from 1990 to 2013 and 4 of the 9 years ended negatively. That doesn't sound like a good prediction, but there were only 6 negative years from 1990 to 2013, and 4 of the 6 also had negative Januarys.
I think the take away here is that if January is negative, it is a good indication that we could see stocks struggle during the year.
For those of you who follow gold, it is at an important level as it tested recent lows on Tuesday and rebounded. It is in a clear downtrend so it is a make or break time for this metal. All of the gaps on this chart are filled except for the one up near 125.00. Possibly a little ambitious, particularly with the downtrend, but you know those gaps like to get filled eventually.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds recently broke down and attempted a rally on Monday, but things went south again on Tuesday as the old support continues to act as resistance on both of these bond charts. The 20+ year chart did put in a possible reversal day, however.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dumb money has been in control for many months and that can mean a little shake-up and volatility is due. Whether that will happen in the seasonally positive month of January remains to be seen, but as we talked about above, the clue might be what happens early this month, as often times the first few days in January determine what kind of month we are going to have.
In today's TSP Talk Plus Report we look at the put / call ratios, some extreme bull / bears readings, and the smart / dumb money confidence indicators. 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 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.
