12/02/25
December got off to a rocky start and it may be related to a weekend sell off in Bitcoin, although rising yields added to the drama. But after five straight positive days, a moderate down day for stocks is certainly no cause for alarm, although traders may want to see bitcoin stabilize again before feeling confident in the stock market rally again.
Early December is less bullish than late December so a little profit taking after the big 5-day rally to end November is understandable, and while I hate to make this all about bitcoin, the recent sell off in crypto-currencies wiped out a lot of margined crypto accounts, and just as it looked like BTC was finding a bottom, it rolled over again over the weekend and into Monday.
It was good to see it traded off its lows when the stock market closed yesterday, and some follow through to the upside could easily trigger the stock market to come back to life after the one day decline.
Despite the rally in yields yesterday, the odds of a rate cut at this month's FOMC meeting are up to 88%. The 50-day average on the 10-year Treasury Yield held as resistance, but it looks like the orange moving average may be in play as well.
The dollar was down slightly but it came off the lows, rebounding from the early sell off. The pullback last week could have been pre-holiday related, but it looked like it was about to break down early yesterday before recovering and closing back above that blue support line, although it is below that red trading channel after last week's breakdown. Why does this matter? Because the I-fund is influenced by the dollar and a breakdown in UUP would be more advantageous for the I-fund.
The S&P 500 (C-fund) pulled back 0.53% yesterday after five consecutive gains of 0.50% or more, so it wasn't too bad, but the bulls certainly don't want to see the bears take over again. The bulls have to be concerned that last week may have been a pre-holiday reversal, with this week resuming that downside action. Technically, it held in a good spot after breaking above the descending resistance line, but it found support there at the lows yesterday.
The PMO crossover (black above red) is often, not always, a sign that the market needs to pause after getting overbought in the short-term. The one in October was an exception to that rule since we got an overbought pullback, but it turned out to be a month long decline. The crossover in August is more typical, although that indicator is still underperforming the market which could mean trouble at some point.
Interesting: Since 1961, there were 13 cases of the S&P 500 gapping down 0.54% on the first trading day of the month. It finished the month higher 12/13 times, with an average market gain of 4.5%.
This month the Federal Reserve is not only expected to cut interest rates again, but they are planning to end their Quantitative Tightening program. This should bring some welcomed liquidity into the system. The last time we saw them do this, end QT, was in the fall of 2019, and look at the rally that ensued into the end of the year.
I thought it was interesting that the first trading day in December in 2019 was also a bad day.
The lack of data during the government shutdown may have caused some of the anxiety in recent weeks, but we will get data early in December. We will get manufacturing data on Wednesday, the PCE Prices data on Friday, and jobs report has been postponed until Tuesday December 16. That report will include both the October and November employment data, which I can't remember ever happening before.
The DWCPF Index (S-Fund) pulled back sharply but found support at the previous resistance line that it plowed through last week. The 50-day average is not far below and the bulls would really want to see that hold in that area on any further downside.
ACWX (I-fund) was down but it got a little assist from a weaker dollar, although as I mentioned above, the dollar looks to be trying to hold in its ascending channel. The resistance at the bottom of the broken channel isn't a great sign, but it had come a long way in a week and may have just run out of steam in the short-term.
BND (bonds / F-fund) experienced its double top pullback, and that's normal but we'd want to see the 74.20 or 74.0 levels hold. Based on the chart formation, this will either be a major top, but otherwise the more likely scenario is that this is just a pause before another attempt at a breakout to new highs.
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
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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.
December got off to a rocky start and it may be related to a weekend sell off in Bitcoin, although rising yields added to the drama. But after five straight positive days, a moderate down day for stocks is certainly no cause for alarm, although traders may want to see bitcoin stabilize again before feeling confident in the stock market rally again.
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Early December is less bullish than late December so a little profit taking after the big 5-day rally to end November is understandable, and while I hate to make this all about bitcoin, the recent sell off in crypto-currencies wiped out a lot of margined crypto accounts, and just as it looked like BTC was finding a bottom, it rolled over again over the weekend and into Monday.
It was good to see it traded off its lows when the stock market closed yesterday, and some follow through to the upside could easily trigger the stock market to come back to life after the one day decline.
Despite the rally in yields yesterday, the odds of a rate cut at this month's FOMC meeting are up to 88%. The 50-day average on the 10-year Treasury Yield held as resistance, but it looks like the orange moving average may be in play as well.
The dollar was down slightly but it came off the lows, rebounding from the early sell off. The pullback last week could have been pre-holiday related, but it looked like it was about to break down early yesterday before recovering and closing back above that blue support line, although it is below that red trading channel after last week's breakdown. Why does this matter? Because the I-fund is influenced by the dollar and a breakdown in UUP would be more advantageous for the I-fund.
The S&P 500 (C-fund) pulled back 0.53% yesterday after five consecutive gains of 0.50% or more, so it wasn't too bad, but the bulls certainly don't want to see the bears take over again. The bulls have to be concerned that last week may have been a pre-holiday reversal, with this week resuming that downside action. Technically, it held in a good spot after breaking above the descending resistance line, but it found support there at the lows yesterday.
The PMO crossover (black above red) is often, not always, a sign that the market needs to pause after getting overbought in the short-term. The one in October was an exception to that rule since we got an overbought pullback, but it turned out to be a month long decline. The crossover in August is more typical, although that indicator is still underperforming the market which could mean trouble at some point.
Interesting: Since 1961, there were 13 cases of the S&P 500 gapping down 0.54% on the first trading day of the month. It finished the month higher 12/13 times, with an average market gain of 4.5%.
This month the Federal Reserve is not only expected to cut interest rates again, but they are planning to end their Quantitative Tightening program. This should bring some welcomed liquidity into the system. The last time we saw them do this, end QT, was in the fall of 2019, and look at the rally that ensued into the end of the year.
I thought it was interesting that the first trading day in December in 2019 was also a bad day.
The lack of data during the government shutdown may have caused some of the anxiety in recent weeks, but we will get data early in December. We will get manufacturing data on Wednesday, the PCE Prices data on Friday, and jobs report has been postponed until Tuesday December 16. That report will include both the October and November employment data, which I can't remember ever happening before.
The DWCPF Index (S-Fund) pulled back sharply but found support at the previous resistance line that it plowed through last week. The 50-day average is not far below and the bulls would really want to see that hold in that area on any further downside.
ACWX (I-fund) was down but it got a little assist from a weaker dollar, although as I mentioned above, the dollar looks to be trying to hold in its ascending channel. The resistance at the bottom of the broken channel isn't a great sign, but it had come a long way in a week and may have just run out of steam in the short-term.
BND (bonds / F-fund) experienced its double top pullback, and that's normal but we'd want to see the 74.20 or 74.0 levels hold. Based on the chart formation, this will either be a major top, but otherwise the more likely scenario is that this is just a pause before another attempt at a breakout to new highs.
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.
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