01/07/26
Trading day three in January kept the good times rolling for the bulls, and now investors (and me) are wondering if the start of January is predicting how this year is going to go, as it has done many times over the years. All of the major stock indices were positive yesterday, and the Dow and S&P 500 closed at new all-time highs. Small caps led the TSP funds and continue to do very well. Will it finally be the year of the S-fund?
Semiconductors led the way yesterday but the rally has been fairly broad so far in the new year.
I posted this chart a couple of times showing that conventional wisdom of - as goes the first few days in January, so goes January, and so goes the year - hasn't been holding up in recent years, and of course we start to think the axiom is no longer valid. These charts show very choppy starts in early January and the S&P actually traded in the the opposite direction to how those years ended up
But we know how that probably goes: Well, two things: Once "the herd" notices a pattern, it tends to stop working. However, once that herd stops believing in a pattern, does it start working again?
Because historically early strength in January tends to portent a good year (as well as a good January.)
According to @granthawkridge on X:
"When the first five days are positive, the S&P 500 finishes higher 85% of the time, with a 15.9% median return. Negative January starts drop that to 2.6%, with only 44% of years finishing higher."
The S&P 500 (C-fund) broke out to a new closing high yesterday and is testing the December peak. It never quite feels like it as it develops during volatile trading, but if we squint our eyes, this is almost a textbook inverted head and shoulders pattern breakout. I don't want to get too excited because of double top and failed breakout possibilities, but technical analysis is telling us this is probably a good development.
A check on the leaders: Dow Transportation Index and Russell 2000:
They look great and the only issue is whether they are getting too extended. The Russell isn't at new highs yet, but it is testing the old ones.
The Transports hit a new all-time high yesterday for the first time in over a year. In past occurrences, the S&P 500 was higher one year later 16 out of 17 times, with an average return of +12.4%. -- @TheMarketStats on X
The 10-year Treasury Yield was up but once again the 200-day average held as resistance. That's six times in the last month that it tagged the average and closed below it. The 50-day average is holding as support. Bull flags tend to break to the upside, but the prior one broke down before starting a new flag. Bonds and the F-fund move counter to yields.
The dollar bounced back from Monday's negative reversal day and that 50-day average is holding. That didn't stop the I-fund from rallying, but it lagged the gains of the other TSP stock funds.
We get the December jobs report on Friday, and a JOLTs (job openings) report today.
We have the 2026 version of Guess the Dow contest started for interested forum members. Deadline to enter is Friday at 7 PM ET. It's free, and a $100 Amazon eGift Card goes to the winner, so why not?
Here's some of the early guesses:
DWCPF (S-fund) made a new high yesterday, and it is trying to complete, or arguably has completed, its inverted head and shoulders pattern. There is still an open gap down near 2520 so we have to watch out for that, but new highs after a long consolidation period, usually ends well.
The ACWX (I-fund index) lagged the return of the C and S-funds, most likely because of the rally in the dollar, but even that couldn't stop it from blasting through two layers of resistance yesterday. With those open gaps below and a dollar that found support, this is probably due for some kind of pause.
BND (bonds / F-fund) was flat, despite the rally in the 10 and 30-year yields. Longer-term bonds are heavily shorted right now - record level type of shorts, which means this could remain buoyant. But that head and shoulders pattern still looks concerning.
Thanks so much for reading! We'll see you back here tomorrow.
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
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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.
Trading day three in January kept the good times rolling for the bulls, and now investors (and me) are wondering if the start of January is predicting how this year is going to go, as it has done many times over the years. All of the major stock indices were positive yesterday, and the Dow and S&P 500 closed at new all-time highs. Small caps led the TSP funds and continue to do very well. Will it finally be the year of the S-fund?
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Semiconductors led the way yesterday but the rally has been fairly broad so far in the new year.
I posted this chart a couple of times showing that conventional wisdom of - as goes the first few days in January, so goes January, and so goes the year - hasn't been holding up in recent years, and of course we start to think the axiom is no longer valid. These charts show very choppy starts in early January and the S&P actually traded in the the opposite direction to how those years ended up
But we know how that probably goes: Well, two things: Once "the herd" notices a pattern, it tends to stop working. However, once that herd stops believing in a pattern, does it start working again?
Because historically early strength in January tends to portent a good year (as well as a good January.)
According to @granthawkridge on X:
"When the first five days are positive, the S&P 500 finishes higher 85% of the time, with a 15.9% median return. Negative January starts drop that to 2.6%, with only 44% of years finishing higher."
The S&P 500 (C-fund) broke out to a new closing high yesterday and is testing the December peak. It never quite feels like it as it develops during volatile trading, but if we squint our eyes, this is almost a textbook inverted head and shoulders pattern breakout. I don't want to get too excited because of double top and failed breakout possibilities, but technical analysis is telling us this is probably a good development.
A check on the leaders: Dow Transportation Index and Russell 2000:
They look great and the only issue is whether they are getting too extended. The Russell isn't at new highs yet, but it is testing the old ones.
The Transports hit a new all-time high yesterday for the first time in over a year. In past occurrences, the S&P 500 was higher one year later 16 out of 17 times, with an average return of +12.4%. -- @TheMarketStats on X
The 10-year Treasury Yield was up but once again the 200-day average held as resistance. That's six times in the last month that it tagged the average and closed below it. The 50-day average is holding as support. Bull flags tend to break to the upside, but the prior one broke down before starting a new flag. Bonds and the F-fund move counter to yields.
The dollar bounced back from Monday's negative reversal day and that 50-day average is holding. That didn't stop the I-fund from rallying, but it lagged the gains of the other TSP stock funds.
We get the December jobs report on Friday, and a JOLTs (job openings) report today.
We have the 2026 version of Guess the Dow contest started for interested forum members. Deadline to enter is Friday at 7 PM ET. It's free, and a $100 Amazon eGift Card goes to the winner, so why not?
Here's some of the early guesses:
DWCPF (S-fund) made a new high yesterday, and it is trying to complete, or arguably has completed, its inverted head and shoulders pattern. There is still an open gap down near 2520 so we have to watch out for that, but new highs after a long consolidation period, usually ends well.
The ACWX (I-fund index) lagged the return of the C and S-funds, most likely because of the rally in the dollar, but even that couldn't stop it from blasting through two layers of resistance yesterday. With those open gaps below and a dollar that found support, this is probably due for some kind of pause.
BND (bonds / F-fund) was flat, despite the rally in the 10 and 30-year yields. Longer-term bonds are heavily shorted right now - record level type of shorts, which means this could remain buoyant. But that head and shoulders pattern still looks concerning.
Thanks so much for reading! We'll see you back here tomorrow.
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.
