Stocks gapped up on Monday morning as the tax bill inches closer to becoming law. The Dow gained 140-points, and the rally was broad spanning all of the major indices. This was even after John McCain said he would miss the vote on the tax bill, a much needed republican vote, but the stock market didn't flinch. The vote will be close but based on the market, investors do not seemed worry that it might not pass.[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="align: center"]
[/TD]
[/TR]
[/TABLE]
The S&P 500 actually closed near the lows of the day - another strange divergence that we've been seeing. I would say that this is a negative, but I can only allow myself to sound dumb for so long. I have completely underestimated the power of this tax bill rally.
Not that I didn't think that the tax bill would benefit stocks. I just didn't expect it to move stocks higher for almost 4 months with virtually no pullback. I've been around long enough to know that all good things eventually do come to an end, but I have no idea when that will be. My best guess at this point is that we will eventually get a sell the news reaction to the tax bill, once it's signed, but in the meantime we are entering the strongest seasonal period of the year.
The SPY (S&P 500 / C-fund) gapped up again. Is this an "exhaustion gap?" I believe I called one or two other exhaustion gaps earlier this year that obviously were not since we are at new highs again. Positive seasonality hits yearly highs toward the end of this week and into next, but watch out for a possible sell-the-news reaction - just based on the charts, the overhead resistance, and a potential government shutdown at the end of the week.
The small caps / S-fund had a big day after gapping up and closing at a new high. We did see some pullbacks earlier in the month for the small caps but the 20-day EMA was the best the bears could do before the bulls took charge again. The last open gap (marked #2) did get filled with one quick push lower on December 1st, but the gap before that is still opening making that one a breakaway gap, as opposed to an exhaustion gap.
The Dow Transportation Index also closed at a new high. It is hitting some resistance (blue) now and that is starting to look like an "F" flag (red).
The EAFE Index (I-fund) also opened much higher creating a very large open gap and testing overhead resistance.
The AGG (bonds / F-fund) was down on the day staying within its rising range.
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. We'll see you back here tomorrow.
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.
[TR]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="align: center"]
[/TR]
[/TABLE]
The S&P 500 actually closed near the lows of the day - another strange divergence that we've been seeing. I would say that this is a negative, but I can only allow myself to sound dumb for so long. I have completely underestimated the power of this tax bill rally.
Not that I didn't think that the tax bill would benefit stocks. I just didn't expect it to move stocks higher for almost 4 months with virtually no pullback. I've been around long enough to know that all good things eventually do come to an end, but I have no idea when that will be. My best guess at this point is that we will eventually get a sell the news reaction to the tax bill, once it's signed, but in the meantime we are entering the strongest seasonal period of the year.
The SPY (S&P 500 / C-fund) gapped up again. Is this an "exhaustion gap?" I believe I called one or two other exhaustion gaps earlier this year that obviously were not since we are at new highs again. Positive seasonality hits yearly highs toward the end of this week and into next, but watch out for a possible sell-the-news reaction - just based on the charts, the overhead resistance, and a potential government shutdown at the end of the week.
The small caps / S-fund had a big day after gapping up and closing at a new high. We did see some pullbacks earlier in the month for the small caps but the 20-day EMA was the best the bears could do before the bulls took charge again. The last open gap (marked #2) did get filled with one quick push lower on December 1st, but the gap before that is still opening making that one a breakaway gap, as opposed to an exhaustion gap.
The Dow Transportation Index also closed at a new high. It is hitting some resistance (blue) now and that is starting to look like an "F" flag (red).
The EAFE Index (I-fund) also opened much higher creating a very large open gap and testing overhead resistance.
The AGG (bonds / F-fund) was down on the day staying within its rising range.
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. We'll see you back here tomorrow.
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.
