12/26/25
The bulls continue to be in charge during this holiday season as the low volume, low volatility trading has been behaving as the bulls had hoped leading up to the Santa Claus rally period. Stocks and bonds were up nicely on Wednesday's half day of trading, but it wouldn't take very much bad new to disrupt a low volume trading day. The odds favor the bulls, but the prior two years showed us that's there's no guarantees this time of year.
This may be common knowledge and I don't really hear why stocks do well this time of year but my thought has always been that traders take time off because of the low trading volume, but automatic deposits from paychecks into retirement plans, 401K's, the TSP, etc., don't stop so there is buying but little selling. This may have changed some over the years with the advent of online and mobile trading, but it still has an impact.
Now, if a negative news event occurs, investors and traders may jump into their accounts and do some knee-jerk selling, but short of that, the bulls have the advantage because of the lack of pushback from the bears.
It's possible that because we have become so programmed to expect a rally this coming week, that it gets tougher to make money. As a matter of act the Santa Claus rally didn't work during the previous two years, despite both of those years having 20% gains for the year. Can it fail for a third straight year? It's never happened before, although we saw 3 of 4 down in the early 1990's.
Final 5, and first two trading days of the year:
Come January and all of a sudden there is interest again, and everyone is making New Year's resolutions to pay more attention to their accounts, etc., so trading volume will pick up, but as we have been talking about, the Santa Claus rally is in effect through the second trading day in January, and the bulls have an advantage.
As sick as you may be about hearing me talk about the Santa Claus rally, in January I will be bugging you about how early January can set the tone for the year. Like the Santa Claus rally, it of course is not a guarantee, but for whatever reason, as goes January, so goes the year. And to take it a step further, as goes the first week in January, so goes January.
In January 2025 the C-fund (S&P 500) was up almost 2.8%, and of course it's up 19% today.
In January 2024 the C-fund was up 1.7% and for the year it was up 25%
January 2023, the C-fund gained 6.3% and the for the year it was up 26%.
How about January of 2022? The C-fund lost 5.2% and ended the year down 18%.
That's a small sample but it's a well know phenomenon called the January Barometer. Since 2004 it has actually only been correct 59% of the time with 13 right out of 22 years (including this year), which isn't great, but going back to 1950 it's been correct nearly 90% of the time.
So, pay attention to January, as well as that first week, which sets the tone for the month.
I don't know if anyone will be reading this on Friday, and since all stocks moved higher on Wednesday and I am trying to make this a little brief and just post this one stock fund chart today, and it's a good one.
The S&P 500 (C-fund) broke out to new highs on Wednesday. It's all good and it's money in the bulls' accounts, but trading volume was obviously very low because of the half day of trading, and because of the holidays in general, so whether or not the new highs are sustainable may not be made clear until we get more significant trading after the holidays. But that is a beautiful example of an inverted head and shoulders pattern breaking out.
It didn't take long for the Fast Stochastic indicator to go from oversold to overbought, but that was another good buy signal for that indicator.
Yields rolled over on Wednesday after hitting the 200-day average again, but it still looks like a bull flag so I'm not so certain this is going to break lower. It would be nice for the bulls, but stocks are doing just fine with this sitting in the 4.1% to 4.2% range.
The dollar was up slightly and while it remains in a descending channel, and unlike the $TNX above it, the 200-day average is trying to hold as support on UUP. The recent lows filled in an open gap from October, which has been holding, and now there are open gaps on both sides that could vie for attention.
BND (bonds / F-fund) had a big day with yields rolling over on Wednesday. This is still in the vicinity of that support line and it's been having trouble getting out of that recent range, which does looks like a bearish head and shoulders pattern for bonds.
Thanks so much for reading! Have a great weekend!
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.
The bulls continue to be in charge during this holiday season as the low volume, low volatility trading has been behaving as the bulls had hoped leading up to the Santa Claus rally period. Stocks and bonds were up nicely on Wednesday's half day of trading, but it wouldn't take very much bad new to disrupt a low volume trading day. The odds favor the bulls, but the prior two years showed us that's there's no guarantees this time of year.
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This may be common knowledge and I don't really hear why stocks do well this time of year but my thought has always been that traders take time off because of the low trading volume, but automatic deposits from paychecks into retirement plans, 401K's, the TSP, etc., don't stop so there is buying but little selling. This may have changed some over the years with the advent of online and mobile trading, but it still has an impact.
Now, if a negative news event occurs, investors and traders may jump into their accounts and do some knee-jerk selling, but short of that, the bulls have the advantage because of the lack of pushback from the bears.
It's possible that because we have become so programmed to expect a rally this coming week, that it gets tougher to make money. As a matter of act the Santa Claus rally didn't work during the previous two years, despite both of those years having 20% gains for the year. Can it fail for a third straight year? It's never happened before, although we saw 3 of 4 down in the early 1990's.
Final 5, and first two trading days of the year:
Come January and all of a sudden there is interest again, and everyone is making New Year's resolutions to pay more attention to their accounts, etc., so trading volume will pick up, but as we have been talking about, the Santa Claus rally is in effect through the second trading day in January, and the bulls have an advantage.
As sick as you may be about hearing me talk about the Santa Claus rally, in January I will be bugging you about how early January can set the tone for the year. Like the Santa Claus rally, it of course is not a guarantee, but for whatever reason, as goes January, so goes the year. And to take it a step further, as goes the first week in January, so goes January.
In January 2025 the C-fund (S&P 500) was up almost 2.8%, and of course it's up 19% today.
In January 2024 the C-fund was up 1.7% and for the year it was up 25%
January 2023, the C-fund gained 6.3% and the for the year it was up 26%.
How about January of 2022? The C-fund lost 5.2% and ended the year down 18%.
That's a small sample but it's a well know phenomenon called the January Barometer. Since 2004 it has actually only been correct 59% of the time with 13 right out of 22 years (including this year), which isn't great, but going back to 1950 it's been correct nearly 90% of the time.
So, pay attention to January, as well as that first week, which sets the tone for the month.
I don't know if anyone will be reading this on Friday, and since all stocks moved higher on Wednesday and I am trying to make this a little brief and just post this one stock fund chart today, and it's a good one.
The S&P 500 (C-fund) broke out to new highs on Wednesday. It's all good and it's money in the bulls' accounts, but trading volume was obviously very low because of the half day of trading, and because of the holidays in general, so whether or not the new highs are sustainable may not be made clear until we get more significant trading after the holidays. But that is a beautiful example of an inverted head and shoulders pattern breaking out.
It didn't take long for the Fast Stochastic indicator to go from oversold to overbought, but that was another good buy signal for that indicator.
Yields rolled over on Wednesday after hitting the 200-day average again, but it still looks like a bull flag so I'm not so certain this is going to break lower. It would be nice for the bulls, but stocks are doing just fine with this sitting in the 4.1% to 4.2% range.
The dollar was up slightly and while it remains in a descending channel, and unlike the $TNX above it, the 200-day average is trying to hold as support on UUP. The recent lows filled in an open gap from October, which has been holding, and now there are open gaps on both sides that could vie for attention.
BND (bonds / F-fund) had a big day with yields rolling over on Wednesday. This is still in the vicinity of that support line and it's been having trouble getting out of that recent range, which does looks like a bearish head and shoulders pattern for bonds.
Thanks so much for reading! Have a great weekend!
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.
