TSP Talk - Has the mid-month pullback begun?

Right on cue, the December seasonality chart turned a little negative for this week, and stocks started to wobble right out of the gate. The dip buyers did not show up this time, and we were probably due for something like this after the S&P 500 had been up 12 out of last 14 trading days rally. Bitcoin also backed off about 3% or $3000 yesterday, perhaps turning the risk on folks into a more defensive position, but t'is the season.

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Daily TSP Funds Return
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Here's that December seasonality calendar again. Seasonality is rarely used as a primary indicator but during certain times of the year it takes on more significance than other times. Mid-December has that reputation as being the less bullish stretch for stocks until we get deeper into the month and especially that final week when the bulls tend to take full control. Not always, of course, but there's a strong tendency.

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Chart provided courtesy of www.sentimentrader.com


Small caps of the Russell 2000 and the I-fund were doing quite well early on yesterday, but the volatile small caps of and the S-fund (DWCPF) eventually relented in afternoon traded and ended up leading on the downside and at the lows of the day. Not great. Rising support is the next test.

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While ACWX did hold onto some of those early gains with those overnight international markets closing before the US markets got into hot water, but they did not give the I-fund a gain. Go figure. You can see the updated I-fund and other TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php

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The 10-year Treasury Yield and the dollar were up adding some pressure to the indices. Both are trying to hold at some strong support, which may not be the best recipe for the rally in stocks, but again, it's that time of December.

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I don't want to make too much of yesterday's action. Let's say it's not unexpected, but the question is whether you want to try to time any kind of meaningful dip or pullback if you own stocks, or just hold stocks and play for an assumed late December rally? If you're not in stocks, an opportunity could be coming.

This week we will get more inflation data with the CPI report on Wednesday, and the PPI Producer Prices report on Thursday.

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The S&P 500 (C-fund) pulled back and had its largest one day drop since the post election pullback. It was "just" 0.61% after 12 of 14 positive days, and the action did some tidying up on the chart as it filled in the open gaps from December 4th. There is rising support coming up near 6050, and as we talked about before, the area just above the 6000 breakout level is also an area that can get retested, and not be damaging to the chart.

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BND (bonds / F-fund) pulled back with stocks but remains in the rising trading channel, nearing that overhead open gap. It's had a nice run off the lows and at this point, as it nears some possible resistance, we have to consider if this is a rally off a bottom for bonds, or just a rally in a new longer-term downtrend.

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Thanks so much for reading! We'll see you back here tomorrow.

Tom Crowley


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I don't want to make too much of yesterday's action. Let's say it's not unexpected, but the question is whether you want to try to time any kind of meaningful dip or pullback if you own stocks, or just hold stocks and play for an assumed late December rally? If you're not in stocks, an opportunity could be coming.

From the perspective of the sidelines here - Mornings like yesterday would typically provoke me to add stocks, but I would need the C-fund to be at least 1.5% cheaper ($94.14) to get me to buy. I do have my eye on the S-fund. I will likely throw some cash at it tomorrow if I see the DWPCF sitting near that 20-day EMA at the deadline tomorrow. That would mean at least another 1% decline though.
 
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