The year ended with a late push higher into the close to new highs for large caps, while the small caps limped across the finish line with some moderate losses. The Dow ended the day with a gain of 197-points, the S&P added a similar 0.64%, while the small caps lost 0.34%. The I-fund fared even worse because of the dollar rallying sharply.
[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]
You can see the annual returns for the funds above, and while all of them were positive there were big differences in the returns. If you didn't play the huge moves - up or down - in the crazy year that was 2020 correctly, you may have gotten eaten up, and as I've whined about before, I was one of the victims of that. On the other hand, some of our members in the AutoTracker had a monster year, timing the swings perfectly.
Sparky714 made one transaction in 2020. Starting the year 100% in the G-fund, he made a move to 100% S-fund COB 3/16. That resulted in a gain of 104% for the year. Incredible, and I wanted to congratulate him on the amazing year!
It was so good that I had several people contact to call us out on that return. Some just didn't want to believe it, and some were confused how someone could make over 100% when none of the funds came even close. I think most of our regular readers understand, so I won't go into details here, but real quick: DWCPF (the S-fund's index) was just over 900 on March 16 when he bought it, and it ended the year at 1969. The math is pretty simple from there.
We also have an annual "Guess the Dow" contest where each year, during the first week of January, we ask forum members to guess where the Dow will close at the end of the year, and this year the winner was Tsunami. Tsunami's guess was 30,625 and the Dow closed at 30,606 so he was only off by 19 points. Very nicely done! He won a $100 Amazon e-gift card.
The 2021 contest is going on now and we'll accept guesses until 5 PM ET on Sunday January 10. More here:
And one final Administrative Note: We have an annual subscription sale going on through Friday for our premium services. Even if you have an existing annual subscription, you will be able to add another year at a 25% discount, and monthly subscriptions can convert to annual to get this discount. More on that can be found here.
OK, onto the market. The start of a new year can often be explosive. There is a positive bias historically to the start of a new year, but when they are bad, they can be very bad. Here's the seasonality chart for January and you can see all of the green to start the year, although the percentage of times positive is in the 50% to 60% area, so nothing earth shattering. The difference is that when it's up, it can be up big.
Chart provided courtesy of www.sentimentrader.com
The futures opened mixed on Sunday with the S&P 500 and Nasdaq down modestly, while the small caps Russell 2000 was up.
I went back to look at the start of several years and I came across this 2004 into 2005 chart. The comparison was compelling, but as we've said many times, it seems like once you notice a repeating pattern, it tends to be just about over.
It's a little tough to see but if you click on the chart below you can see the full size image to see how that one played out to start 2005.
The COVID pandemic has helped central banks and governments around the world hand the global economy about $90 trillion in stimulus, and the Fed has no intention of raising rates until at least 2023, so this adds up to liquidity like the world has never seen before. With that in place it sounds like there is nowhere else to be but in the stock markets, yet if we look at some of the valuations of the stock market indices, they are at or near historically overvalued levels already. What could go wrong, right?
I'm heading into the new year a little tentatively, but if there is one thing we learned in 2020 it was that no matter how overbought, overly bullish investors are, or over valued stocks appear to be, there seems to be an appetite from investors to keep buying, and the massive liquidity is the reason. Still, if you have patience, there is probably a better buying opportunity down the road.
We still have some economic issues as long as COVID is still spreading and government officials are locking down businesses and limiting what people can do. We will get geopolitical events, good news, bad news, earnings beats and misses, etc., and that should give us higher volatility and trading opportunities for those who have not gone to the buy and hold strategy.
We know how well buy and hold can work, but sparky714's 104% return last year (and there were others with super impressive returns on our list) showed us just how rewarding a couple of well timed trades can work. Unfortunately the opposite is true that poorly times trades can hurt. Just remember that a buy and hold strategy means holding onto stocks when they are dumping like we saw in March of last year. It's easy to forget how painful that can be to watch.
This could be an eventful week for stocks with the Georgia run off elections on Tuesday that will determine the majority in the Senate. That makes a big difference in how our country will be governed for the next two to four years. There's also a big political rally planned in D.C. on Wednesday while congress determines the certification of the election results. They could be market movers.
The S&P 500 (C-fund) has been in this rising trading channel since the peak on November 9th, which was the day Pfizer announced the positive results of their vaccine. That pattern is what we call an "F" flag, and they can go on for quite a while, but they also tend to break to the downside when they do break. However it it is sure pressing the top of that channel now.
The weekly chart shows just how extended the S&P 500 is, from just about every vantage point. It has gone from 2200 to 3700, which sounds extraordinary, but it did start 2020 closer to 3300. It just looks dramatic because of the - probably overdone - sell off in February and March.
The DWCPF (small caps / S-fund) fell out of its "F" flag last week, and it is either looking to find support at the 20-day EMA (green) or that could be a bear flag. It's tough to say, particularly when there is a reset at the beginning of a new year.
EFA / I-fund was down on Thursday with the dollar popping 0.29%, but also the late rally in stocks in the U.S. happened after the overseas markets were already closed.
BND (Bonds / F-fund) had a big day as it took out some overhead resistance, and appears to be headed for the red open gap near 88.40. Technically, it is forming a large base and actually looks quite bullish with the breakout on Thursday. But why would yields (which move counter to bond prices) be going down if the economy is doing so well? Maybe the bond market is sniffing out some economic trouble in 2021?
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
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.
[TABLE="align: center"]
[TR]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
[/TD]
[TD="align: center"]
[/TR]
[/TABLE]
You can see the annual returns for the funds above, and while all of them were positive there were big differences in the returns. If you didn't play the huge moves - up or down - in the crazy year that was 2020 correctly, you may have gotten eaten up, and as I've whined about before, I was one of the victims of that. On the other hand, some of our members in the AutoTracker had a monster year, timing the swings perfectly.
Sparky714 made one transaction in 2020. Starting the year 100% in the G-fund, he made a move to 100% S-fund COB 3/16. That resulted in a gain of 104% for the year. Incredible, and I wanted to congratulate him on the amazing year!
It was so good that I had several people contact to call us out on that return. Some just didn't want to believe it, and some were confused how someone could make over 100% when none of the funds came even close. I think most of our regular readers understand, so I won't go into details here, but real quick: DWCPF (the S-fund's index) was just over 900 on March 16 when he bought it, and it ended the year at 1969. The math is pretty simple from there.
We also have an annual "Guess the Dow" contest where each year, during the first week of January, we ask forum members to guess where the Dow will close at the end of the year, and this year the winner was Tsunami. Tsunami's guess was 30,625 and the Dow closed at 30,606 so he was only off by 19 points. Very nicely done! He won a $100 Amazon e-gift card.
The 2021 contest is going on now and we'll accept guesses until 5 PM ET on Sunday January 10. More here:
And one final Administrative Note: We have an annual subscription sale going on through Friday for our premium services. Even if you have an existing annual subscription, you will be able to add another year at a 25% discount, and monthly subscriptions can convert to annual to get this discount. More on that can be found here.
OK, onto the market. The start of a new year can often be explosive. There is a positive bias historically to the start of a new year, but when they are bad, they can be very bad. Here's the seasonality chart for January and you can see all of the green to start the year, although the percentage of times positive is in the 50% to 60% area, so nothing earth shattering. The difference is that when it's up, it can be up big.
Chart provided courtesy of www.sentimentrader.com
The futures opened mixed on Sunday with the S&P 500 and Nasdaq down modestly, while the small caps Russell 2000 was up.
I went back to look at the start of several years and I came across this 2004 into 2005 chart. The comparison was compelling, but as we've said many times, it seems like once you notice a repeating pattern, it tends to be just about over.
It's a little tough to see but if you click on the chart below you can see the full size image to see how that one played out to start 2005.
The COVID pandemic has helped central banks and governments around the world hand the global economy about $90 trillion in stimulus, and the Fed has no intention of raising rates until at least 2023, so this adds up to liquidity like the world has never seen before. With that in place it sounds like there is nowhere else to be but in the stock markets, yet if we look at some of the valuations of the stock market indices, they are at or near historically overvalued levels already. What could go wrong, right?
I'm heading into the new year a little tentatively, but if there is one thing we learned in 2020 it was that no matter how overbought, overly bullish investors are, or over valued stocks appear to be, there seems to be an appetite from investors to keep buying, and the massive liquidity is the reason. Still, if you have patience, there is probably a better buying opportunity down the road.
We still have some economic issues as long as COVID is still spreading and government officials are locking down businesses and limiting what people can do. We will get geopolitical events, good news, bad news, earnings beats and misses, etc., and that should give us higher volatility and trading opportunities for those who have not gone to the buy and hold strategy.
We know how well buy and hold can work, but sparky714's 104% return last year (and there were others with super impressive returns on our list) showed us just how rewarding a couple of well timed trades can work. Unfortunately the opposite is true that poorly times trades can hurt. Just remember that a buy and hold strategy means holding onto stocks when they are dumping like we saw in March of last year. It's easy to forget how painful that can be to watch.
This could be an eventful week for stocks with the Georgia run off elections on Tuesday that will determine the majority in the Senate. That makes a big difference in how our country will be governed for the next two to four years. There's also a big political rally planned in D.C. on Wednesday while congress determines the certification of the election results. They could be market movers.
The S&P 500 (C-fund) has been in this rising trading channel since the peak on November 9th, which was the day Pfizer announced the positive results of their vaccine. That pattern is what we call an "F" flag, and they can go on for quite a while, but they also tend to break to the downside when they do break. However it it is sure pressing the top of that channel now.
The weekly chart shows just how extended the S&P 500 is, from just about every vantage point. It has gone from 2200 to 3700, which sounds extraordinary, but it did start 2020 closer to 3300. It just looks dramatic because of the - probably overdone - sell off in February and March.
The DWCPF (small caps / S-fund) fell out of its "F" flag last week, and it is either looking to find support at the 20-day EMA (green) or that could be a bear flag. It's tough to say, particularly when there is a reset at the beginning of a new year.
EFA / I-fund was down on Thursday with the dollar popping 0.29%, but also the late rally in stocks in the U.S. happened after the overseas markets were already closed.
BND (Bonds / F-fund) had a big day as it took out some overhead resistance, and appears to be headed for the red open gap near 88.40. Technically, it is forming a large base and actually looks quite bullish with the breakout on Thursday. But why would yields (which move counter to bond prices) be going down if the economy is doing so well? Maybe the bond market is sniffing out some economic trouble in 2021?
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
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.
