It was another lost opportunity for the bulls on Friday as an early 400-point rally turned into another 400-point loss and the downside pressure persists. According to my data, it was the highest trading volume day on the NYSE ever. The Nasdaq, particularly those old high flying FAANG stocks, were hit hardest, and small caps lagged the larger stocks. Will there be a Santa Claus rally at all? It's already a no-show but this week between Christmas and New Year's has a great record, particularly when the week before Christmas is negative.
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[TD="align: center"] Daily TSP Funds Return
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[TD][/TD]
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[/TD]
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Many nervous investors have been calling up their fund managers telling then to get them out of this mess, and this is likely why we are seeing high volume down days this week, on top of the tax selling situation. But if you are a fund manager and you are forced to liquidate assets to raise cash to pay these outflow withdrawals, when would you want to do that? During the week when volumes are "normal" or during Christmas week when liquidity will be an issue making it a lot tougher to sell because of the lack of volume? My point is, the excessive selling to end last week may have been related to that, but it could wane this week.
We started the year in January with a bloated market that tacked onto big 2017 gains and hit extreme overbought conditions. Fast forward 11 months and both the C and S-funds entered December holding onto positive returns, but that's long gone and now they have 3.5 days of trading left to try to reverse those losses, which seems like a very tall order. What a disaster these final few months have been for stocks.
I started 2018 being very bearish and the market punished me with the S&P 500 gaining 5.7% in January. As I have said many times, markets can go up much longer than seems reasonable, and as we see now, they can go down longer and steeper than seems reasonable. What it is trying to do is get that last person (figuratively), who is on the fence, to sell. Once it has that last victim, it will likely turn on a dime. But whether that is Monday, after Christmas, or in the New Year, we can only speculate.
While I know this is a very troubled market, I am expecting some kind of oversold rally this week, but obviously risk levels are high if I'm wrong, and like early 2018, this market may just keep going down and humbling us market timers who think we know how it it going to play out.
We have several indicators that we follow and many have been at levels where, for example, when 'XYZ' happens, the market is up a week later 16 out of the last 18 times. Well, we've been getting those 2 out of 18 times outcomes lately. As I said, the opposite was happening last January when I was bearish and the S&P gained another 6% for the month. But eventually, the market returns to the norms and things settle down. It just may not be on our expected timetable.
So, if I had to predict, and that's not worth much in this fast moving market, I would say this week we see a solid rally, but the struggles resume in January. I had really thought the rally was going to start in the final days of last week, and we did have a couple of 300+ point intraday rallies to make me feel smart, but those rallies quickly failed and I obviously could not have been more wrong.
Administrative note: Federal employees excused from duty on Dec. 24. The TSP has posted the closing on December 25. The market and the TSP will be open for an abbreviated trading day on Monday (markets close at 1 PM ET.)
Let's make this quick today since it's Christmas Eve and not much has changed.
The S&P 500 / C-fund is in a spiraling downward trading channel hitting new 52-week lows on Friday, on historic trading volume. That high volume is likely fund managers bailing before this week's light volume trading.
Looking for possible initial landing zones in the S&P 500 during this leg down...
And on the small caps Russell 2000 Index...
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. Merry Christmas!
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.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[TD][/TD]
[TD="align: center"]
[/TR]
[/TABLE]
Many nervous investors have been calling up their fund managers telling then to get them out of this mess, and this is likely why we are seeing high volume down days this week, on top of the tax selling situation. But if you are a fund manager and you are forced to liquidate assets to raise cash to pay these outflow withdrawals, when would you want to do that? During the week when volumes are "normal" or during Christmas week when liquidity will be an issue making it a lot tougher to sell because of the lack of volume? My point is, the excessive selling to end last week may have been related to that, but it could wane this week.
We started the year in January with a bloated market that tacked onto big 2017 gains and hit extreme overbought conditions. Fast forward 11 months and both the C and S-funds entered December holding onto positive returns, but that's long gone and now they have 3.5 days of trading left to try to reverse those losses, which seems like a very tall order. What a disaster these final few months have been for stocks.
I started 2018 being very bearish and the market punished me with the S&P 500 gaining 5.7% in January. As I have said many times, markets can go up much longer than seems reasonable, and as we see now, they can go down longer and steeper than seems reasonable. What it is trying to do is get that last person (figuratively), who is on the fence, to sell. Once it has that last victim, it will likely turn on a dime. But whether that is Monday, after Christmas, or in the New Year, we can only speculate.
While I know this is a very troubled market, I am expecting some kind of oversold rally this week, but obviously risk levels are high if I'm wrong, and like early 2018, this market may just keep going down and humbling us market timers who think we know how it it going to play out.
We have several indicators that we follow and many have been at levels where, for example, when 'XYZ' happens, the market is up a week later 16 out of the last 18 times. Well, we've been getting those 2 out of 18 times outcomes lately. As I said, the opposite was happening last January when I was bearish and the S&P gained another 6% for the month. But eventually, the market returns to the norms and things settle down. It just may not be on our expected timetable.
So, if I had to predict, and that's not worth much in this fast moving market, I would say this week we see a solid rally, but the struggles resume in January. I had really thought the rally was going to start in the final days of last week, and we did have a couple of 300+ point intraday rallies to make me feel smart, but those rallies quickly failed and I obviously could not have been more wrong.
Administrative note: Federal employees excused from duty on Dec. 24. The TSP has posted the closing on December 25. The market and the TSP will be open for an abbreviated trading day on Monday (markets close at 1 PM ET.)
Let's make this quick today since it's Christmas Eve and not much has changed.
The S&P 500 / C-fund is in a spiraling downward trading channel hitting new 52-week lows on Friday, on historic trading volume. That high volume is likely fund managers bailing before this week's light volume trading.
Looking for possible initial landing zones in the S&P 500 during this leg down...
And on the small caps Russell 2000 Index...
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. Merry Christmas!
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.
