The stock market was stable for most of the day on Friday, the last trading day of the year, but a late sell off spoiled the day to end the year on a sour note. The final day of the year has been on the negative side in recent years - something that almost never happened many years ago. The Dow lost 60-points while the I-fund stayed positive, not as infected by the late selling in the U.S. market. Bonds were up (yields down) and the dollar also dropped.
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The S&P 500 / C-fund slipped in the final minutes of trading to close the year just shy of its all time highs. It is at the top of a large trading channel (blue) but the channel is sloping upward. There is a lot of room on the downside if the selling continues from last week, but as I mentioned above, the first few days of the New Year may not follow the typical technical analysis plan. I see the Sunday night futures opened modestly higher (as of 7 PM ET) with small caps futures leading. Of course anything can happen overnight between 7 PM ET and Monday morning.
The weekly chart shows that last week's candlestick could be a reversal pattern with that small kangaroo tail on the upside, but it remains in a long uptrend, although in the 4th quarter last year that trading channel widened. Any pullbacks or corrections in early 2022 will look for support just below 4600 and again near the 50-week average, and then 4200. Otherwise, the trend is up.
DWCPF (small caps / S-fund) had such a nice run up during the week before Christmas but it hit a wall at a confluence of moving averages. Some of those averages had been solid support earlier in the year but they've turned into resistance since falling below them in November. A New Year could have the ability to jump that kind of resistance, but if not, the open gap near 2100 looks like a potential downside target.
The EFA (I-fund) stumbled into the finish line in the last week of trading, but that could be a bull flag forming. There is room on the upside before it hits that top of that large blue trading channel, but there is also an open gap near 76.50 that could be a potential pullback target.
BND (Bonds / F-fund) refused to breakdown but it has been under a lot of pressure since the early December peak. There is a big open gap near 84.30 which I can't see staying open forever. It is below there 50 and 200 day EMA's so I start 2020 pretty bearish on bonds, but as I've said before, bonds have repeatedly fooled me over the years.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
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The stock market has dismissed a lot of concerns over the last few weeks, and climbing the wall of worry to the all time highs is something that it had done effectively in 2021.
Will inflation be a major factor in 2022? Will rising interest rates slow the economy? Will overvaluations be corrected? Will the spiking number of Omicron cases, with the potential for additional lockdowns, have an impact on the economy? Will the Russia / Ukraine problem get resolved peacefully? How about the rising tension between China and Taiwan? Will the nearly $30 trillion national debt ever become an actual problem?
That's just some of the pieces of the wall of worry that we face to start 2022.
It wouldn't surprise me to see a 10% to 20% decline in the first half of the year, so I plan to keep cash on hand often enough this year to try to take advantage of that. I can't resist a good buying opportunity when they do come around so I will be trading when I can, so the trick for me this year is basically to do what I normally do which is hit and run the buying opportunities, but try to have cash (G-fund) on hand which means selling rallies and taking profits when I can.
The analysis gets a little suspect when a New Year starts as the trading gets driven more by emotional and situational investing, rather than technical analysis. There's new money getting pumped in, but there can also be selling early in the year for anyone who held onto to stocks into the New Year to defer their 2021 capital gains into 2022 for tax purposes.
I anticipate the first week of 2022 to be volatile which can set up good trading opportunities, or whipsaw us if we are on the wrong side of the trades, so it could be rewarding, or a little treacherous and frustrating depending on your actions.
Under the current circumstances, I would predict a weaker dollar and rising yields this year but both of those markets baffled me in 2021 - and a lot of other people - so we can't always expect the market to do the obvious.
Best of luck in the New Year, and remember that what worked in 2021 may not necessarily work in 2022. I continue to try to adapt rather than stay rigid in my strategy. This market seems to have changed over the last several years, but history tends to repeat itself, so it is all part of a bigger cycle. People and their reactions don't generally change but knowing where we are in that cycle may give us some clues as to how it could play out.
I don't know how the year will end up, but I have a feeling that the buy and holders will feel some pain at some point this year. That kind of movement in stocks sets up opportunities for those willing to try to take advantage of the volatility, but it's never as easy as it sounds.
Congratulations to tom1tom1 for winning the 2021 TSP Talk Autotracker with an amazing gain of 38.72%. felixthecat took took second with an impressive 36.03% gain, and SO68 was third at +30.98. EricDeLee was a close 4th at +30.87%. Caribbeandan also had a gain over 30%. The final prize list here is posted here:
Also, long time member crommie won the 2021 Guess the Dow Contest by picking 36,325, which was just 13 points off the Dow's close on Friday of 36,338. Nice job!
The 2022 version of the contest will be posted in the forum sometime on Monday and you'll have until next Sunday to make your guess.
Will inflation be a major factor in 2022? Will rising interest rates slow the economy? Will overvaluations be corrected? Will the spiking number of Omicron cases, with the potential for additional lockdowns, have an impact on the economy? Will the Russia / Ukraine problem get resolved peacefully? How about the rising tension between China and Taiwan? Will the nearly $30 trillion national debt ever become an actual problem?
That's just some of the pieces of the wall of worry that we face to start 2022.
It wouldn't surprise me to see a 10% to 20% decline in the first half of the year, so I plan to keep cash on hand often enough this year to try to take advantage of that. I can't resist a good buying opportunity when they do come around so I will be trading when I can, so the trick for me this year is basically to do what I normally do which is hit and run the buying opportunities, but try to have cash (G-fund) on hand which means selling rallies and taking profits when I can.
The analysis gets a little suspect when a New Year starts as the trading gets driven more by emotional and situational investing, rather than technical analysis. There's new money getting pumped in, but there can also be selling early in the year for anyone who held onto to stocks into the New Year to defer their 2021 capital gains into 2022 for tax purposes.
I anticipate the first week of 2022 to be volatile which can set up good trading opportunities, or whipsaw us if we are on the wrong side of the trades, so it could be rewarding, or a little treacherous and frustrating depending on your actions.
Under the current circumstances, I would predict a weaker dollar and rising yields this year but both of those markets baffled me in 2021 - and a lot of other people - so we can't always expect the market to do the obvious.
Best of luck in the New Year, and remember that what worked in 2021 may not necessarily work in 2022. I continue to try to adapt rather than stay rigid in my strategy. This market seems to have changed over the last several years, but history tends to repeat itself, so it is all part of a bigger cycle. People and their reactions don't generally change but knowing where we are in that cycle may give us some clues as to how it could play out.
I don't know how the year will end up, but I have a feeling that the buy and holders will feel some pain at some point this year. That kind of movement in stocks sets up opportunities for those willing to try to take advantage of the volatility, but it's never as easy as it sounds.
Congratulations to tom1tom1 for winning the 2021 TSP Talk Autotracker with an amazing gain of 38.72%. felixthecat took took second with an impressive 36.03% gain, and SO68 was third at +30.98. EricDeLee was a close 4th at +30.87%. Caribbeandan also had a gain over 30%. The final prize list here is posted here:
Also, long time member crommie won the 2021 Guess the Dow Contest by picking 36,325, which was just 13 points off the Dow's close on Friday of 36,338. Nice job!
The 2022 version of the contest will be posted in the forum sometime on Monday and you'll have until next Sunday to make your guess.
The S&P 500 / C-fund slipped in the final minutes of trading to close the year just shy of its all time highs. It is at the top of a large trading channel (blue) but the channel is sloping upward. There is a lot of room on the downside if the selling continues from last week, but as I mentioned above, the first few days of the New Year may not follow the typical technical analysis plan. I see the Sunday night futures opened modestly higher (as of 7 PM ET) with small caps futures leading. Of course anything can happen overnight between 7 PM ET and Monday morning.
The weekly chart shows that last week's candlestick could be a reversal pattern with that small kangaroo tail on the upside, but it remains in a long uptrend, although in the 4th quarter last year that trading channel widened. Any pullbacks or corrections in early 2022 will look for support just below 4600 and again near the 50-week average, and then 4200. Otherwise, the trend is up.
DWCPF (small caps / S-fund) had such a nice run up during the week before Christmas but it hit a wall at a confluence of moving averages. Some of those averages had been solid support earlier in the year but they've turned into resistance since falling below them in November. A New Year could have the ability to jump that kind of resistance, but if not, the open gap near 2100 looks like a potential downside target.
The EFA (I-fund) stumbled into the finish line in the last week of trading, but that could be a bull flag forming. There is room on the upside before it hits that top of that large blue trading channel, but there is also an open gap near 76.50 that could be a potential pullback target.
BND (Bonds / F-fund) refused to breakdown but it has been under a lot of pressure since the early December peak. There is a big open gap near 84.30 which I can't see staying open forever. It is below there 50 and 200 day EMA's so I start 2020 pretty bearish on bonds, but as I've said before, bonds have repeatedly fooled me over the years.
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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
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.
