12/27/11
I hope everyone enjoyed their holiday weekend. I assume many of you are still on vacation but the market is open again so it's back to work.
The last day of trading before Christmas is historically one of the most consistently positive days of the year and it did not disappoint this year. Stocks rallied early, held onto those gains, and gained strength into the close, and the Dow ended the day at the high picking up 124-points. Now comes the strongest week of the year... historically. Of course there are no guarantees.
For the TSP, the C-fund gained 0.91% on Friday, the S-fund was up 0.50%, the I-fund made 0.58%, and the F-fund (bonds) lost 0.60%.
For weekly and monthly TSP returns, please see our recent TSP Weekly Wrap-Up.
We had some nice gains last week and we are starting to see some extended overbought readings so this normally strong week of the year does have some headwinds.
The good news is, Friday's rally took out the descending resistance line on the S&P 500, but we will still want to see a higher high above the early December high. We already had a higher low this month so the higher high will confirm a new uptrend. Of course this is the middle of holiday trading and I don't always trust it. After the holidays we will get the real story.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I do like the second buy signal on the PMO indicator above. They usually stick, but we saw a double last spring and that only last about a week as it failed after about a 2% rally.
You might notice that we also had an inverse head and shoulders last spring that failed. Here we are again in a similar situation with a double PMO buy signal, and an inverse head and shoulders.
The yield on the 10-year T-Note is back above 2% and sees to have broken out above a descending wedge. New out of Europe seems to be calling the shots here but a descending wedge is bullish and a breakout is a breakout until it fails.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The TSP Talk Sentiment Survey came in at 71% bulls, 19% bears, for a bulls to bears ratio of 3.74 to 1. That is the highest ratio since this same week last year in December 2010. The 3.71 to 1 ratio is a big sell signal in a bear market which means the system allocation will have to remain 100% G Fund this week, but last year the seasonality won out and we saw modest gains in the last week of 2010 - and actually the following two weeks as well.
Here is the seasonality chart specifically for the week before, and the week after the Christmas Day NYSE holiday. Today is day "+1" on the chart...
Chart provided courtesy of www.sentimentrader.com
This week is the most positive week of the year historically. Let's see what happens.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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). I'll post it below under a different name. This one, and the one above look the same to me.
