Stocks enter Thanksgiving week following the 5-day winning streak in the S&P 500 last week. The seasonality data suggests a bullish bias this week for stocks, however we are seeing some extremes in sentiment, although not as bad as you might think, and perhaps some overbought charts, but many chart formations are set up well for another leg higher. Small caps have been leading after back to back 1.71% daily gains, and for the week it had an impressive 5.4% gain, compared to the S&P 500's (C-fund) weekly gain of 1.7%.
I talk a lot about seasonality and for most of the year it is just a slight assist in trying to predict market direction, but there are other times when it becomes one of the primary indicators. Unfortunately, even then there's no guarantees.
The Election year seasonality trends did a good job - if we looked at the green "Sitting President Running" average line, and of course technically we had a sitting president running up until the early summer, but by September it was really an "Open Field", which would have been the black line on this chart. September was modestly positive for the S&P 500, while in October is was down slightly. Now of course in November stocks have been going up sharply, so the green line has been quite accurate. If it holds, perhaps there is a pullback coming in the first half of December.
Here is the 10-year average and mean returns from each day between Tuesday and Friday of Thanksgiving week. Friday's average is negative but that is skewed by a 2.27% loss on that day in 2021, which we'll talk more about below. It can happen, but you can see that the median return is slightly positive so there is a bullish bias for the rest of the week. The final column is the total return for Wednesday and Friday combined. I only show that because there used to be a tendency for Friday to move in the opposite direction of Wednesday, but combined it's positive.
If we go back even further, from 1988 through 2023, the median data is very similar to the last 10 years so it has been consistent, with a few clunker years thrown in there.
As I mentioned, 2021 was sort of a clunker, and the chart actually looks eerily similar to the current chart. Look at that string, consistent rally from mid-October of that year, up through the first week in November where it started to trade sideways for a couple of weeks. That was the year where Thanksgiving week went against the grain and those on a holiday bullish auto-pilot got slammed. That was followed by a very choppy December, although that December ended with a solid 4.5% gain that year.
The historical December seasonality chart looks modestly positive in the first handful of days but there is a tendency for a mid-month lull between about December 9th and maybe up to the 20th before the official Santa Claus rally begins. This matches the election chart's green line in the chart up above.
Chart provided courtesy of www.sentimentrader.com
There's just three and a half trading days this week with the Thanksgiving holiday on Thursday and a half day of trading on Friday.
The S&P 500 (C-fund) is reaching toward more all-time highs, but there is some resistance in the area that could play out like one of the two prior similar setups. One easily broke out to new highs in October, but the one earlier this month led to a pullback at that resistance. Could we get a pullback during Thanksgiving week? Not typically, but it has happened before.
DWCPF (S-fund) gained 1.71% on Friday making it back to back 1.71% again, which is quite remarkable. It had a 5.4% gain last week and for the month it is up over 11%, so I don't think I can add to that analysis, unless you believe it has come too far, too fast.
ACWX was up just 0.20% on Friday and the I-fund was given a 0.51% gain. That's great but we're still left with guessing the return since we don't have an accurate tracking vehicle yet. Clearly the I-fund has been underperforming, and it is a direct result of the strength in the dollar, as you can see in the bottom two charts below.
You can see the updated TSP prices and returns posted by about 8:15 PM ET daily here: https://www.tsptalk.com/tsp_share_prices.php
BND (bonds / F-fund) continues to knock on that resistance line's door as the downtrend has continued and the trading channel has held. But even if that channel breaks and bonds do well, there's a chance that stock wills do even better, unless the breakout is caused by very weak economic data, or an ugly geopolitical event. Otherwise lower yields are likely help both stocks and bonds.
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.
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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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I talk a lot about seasonality and for most of the year it is just a slight assist in trying to predict market direction, but there are other times when it becomes one of the primary indicators. Unfortunately, even then there's no guarantees.
The Election year seasonality trends did a good job - if we looked at the green "Sitting President Running" average line, and of course technically we had a sitting president running up until the early summer, but by September it was really an "Open Field", which would have been the black line on this chart. September was modestly positive for the S&P 500, while in October is was down slightly. Now of course in November stocks have been going up sharply, so the green line has been quite accurate. If it holds, perhaps there is a pullback coming in the first half of December.
Here is the 10-year average and mean returns from each day between Tuesday and Friday of Thanksgiving week. Friday's average is negative but that is skewed by a 2.27% loss on that day in 2021, which we'll talk more about below. It can happen, but you can see that the median return is slightly positive so there is a bullish bias for the rest of the week. The final column is the total return for Wednesday and Friday combined. I only show that because there used to be a tendency for Friday to move in the opposite direction of Wednesday, but combined it's positive.
If we go back even further, from 1988 through 2023, the median data is very similar to the last 10 years so it has been consistent, with a few clunker years thrown in there.
As I mentioned, 2021 was sort of a clunker, and the chart actually looks eerily similar to the current chart. Look at that string, consistent rally from mid-October of that year, up through the first week in November where it started to trade sideways for a couple of weeks. That was the year where Thanksgiving week went against the grain and those on a holiday bullish auto-pilot got slammed. That was followed by a very choppy December, although that December ended with a solid 4.5% gain that year.
The historical December seasonality chart looks modestly positive in the first handful of days but there is a tendency for a mid-month lull between about December 9th and maybe up to the 20th before the official Santa Claus rally begins. This matches the election chart's green line in the chart up above.
Chart provided courtesy of www.sentimentrader.com
There's just three and a half trading days this week with the Thanksgiving holiday on Thursday and a half day of trading on Friday.
The S&P 500 (C-fund) is reaching toward more all-time highs, but there is some resistance in the area that could play out like one of the two prior similar setups. One easily broke out to new highs in October, but the one earlier this month led to a pullback at that resistance. Could we get a pullback during Thanksgiving week? Not typically, but it has happened before.
DWCPF (S-fund) gained 1.71% on Friday making it back to back 1.71% again, which is quite remarkable. It had a 5.4% gain last week and for the month it is up over 11%, so I don't think I can add to that analysis, unless you believe it has come too far, too fast.
ACWX was up just 0.20% on Friday and the I-fund was given a 0.51% gain. That's great but we're still left with guessing the return since we don't have an accurate tracking vehicle yet. Clearly the I-fund has been underperforming, and it is a direct result of the strength in the dollar, as you can see in the bottom two charts below.
You can see the updated TSP prices and returns posted by about 8:15 PM ET daily here: https://www.tsptalk.com/tsp_share_prices.php
BND (bonds / F-fund) continues to knock on that resistance line's door as the downtrend has continued and the trading channel has held. But even if that channel breaks and bonds do well, there's a chance that stock wills do even better, unless the breakout is caused by very weak economic data, or an ugly geopolitical event. Otherwise lower yields are likely help both stocks and bonds.
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.html
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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