Stocks were mixed on a choppy Wednesday with the Dow losing 45-points while the S&P 500 and Nasdaq closed with gains. The accommodating Fed did their part in the final FOMC meeting of the year to assure investors that they still have our backs. Small caps were down, as were bonds. The dollar fell, so that weakness continued and that kept the I-fund in rally mode.
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The Fed announced their intentions to keep interest rates low for a "very, very, very" long time, and slightly upgraded their economic growth projections for 2021. Just what the doctor ordered for stocks, so it was somewhat interesting that the indices ended the day about where they were during the morning trading session before the Fed's statement.
Yes, there was an initial spike higher after the 2 PM announcement, as we often see big moves from traders playing the post Fed volatility, but some selling in the final half hour of trading took the indices off their highs and it turned into more of a flat session, although we did see more strength in those stay at home type of stocks. Internally the numbers were slightly negative, although the large tech stocks led on the upside, getting most of the attention, so the Nasdaq share volume was positive.
The battle that will ensue now is one of a market that is quite extended, an accommodating investment environment (low rates for the foreseeable future, and plenty of liquidity), a potential tax selling situation with capital gains tax potentially rising next year, and the positive holiday seasonality.
I would say the bulls still have the advantage, but when the turn comes it could happen quickly. Will it be a news event, economic news, the New Year / new direction, or just a capitulation type of an ending to the rally? Historically markets like this will run much longer than we expect, but like we saw last February, things can change in a hurry.
The S&P 500 (C-fund) nearly made a new intraday and closing high after a post FOMC meeting rally, but stocks dipped back slightly into the close preventing it. These small consolidations that we've seen (red horizontal lines) have broken out for the most part each time when they've tested the prior high. Meanwhile, the rising trading channel is intact and the S&P 500 is right about in the middle of that rising range so there is room for the rally to continue to test the top of the range, or retest the the support below. Just remember that these "F" flags do tend to eventually break down, and they can be sharp declines, but you never know when it will happen.
The DWCPF Index / S-fund continues to push higher, despite a small loss yesterday, and the rising channel seems to be get even more narrow. I'm expecting some kind of rollover like we saw in October, but can that happen during the normal Santa Claus rally week, or will we be waiting until 2021 before that happens?
The EFA / I-fund made another new high as the dollar made a new low. Both are extended at this point.
The Dow Transportation Index was the first to breakdown from its steep rising support line, and now it appears to be creating a possible bear flag, which tend to break down. It's a little early to say. We saw a similar mini-bear flag in November and that one actually broke to the upside. Will the broken support line make this one behave more like a typical bear flag?
The VIX may have already abandoned its new rising trading channel. We might blame that on the Fed as traders tend to get more bullish around an FOMC meeting, but now that it is behind us and we didn't get a big rally in stocks after the Fed yesterday, we'll see where this wants to go.
BND (Bonds / F-fund) was down slightly yesterday but remains in a favorable position above that bull flag. After the 50-day EMA held as support earlier in the month, the 20-day EMA has been holding for the last week, which appears bullish for bonds.
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.
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The Fed announced their intentions to keep interest rates low for a "very, very, very" long time, and slightly upgraded their economic growth projections for 2021. Just what the doctor ordered for stocks, so it was somewhat interesting that the indices ended the day about where they were during the morning trading session before the Fed's statement.
Yes, there was an initial spike higher after the 2 PM announcement, as we often see big moves from traders playing the post Fed volatility, but some selling in the final half hour of trading took the indices off their highs and it turned into more of a flat session, although we did see more strength in those stay at home type of stocks. Internally the numbers were slightly negative, although the large tech stocks led on the upside, getting most of the attention, so the Nasdaq share volume was positive.
The battle that will ensue now is one of a market that is quite extended, an accommodating investment environment (low rates for the foreseeable future, and plenty of liquidity), a potential tax selling situation with capital gains tax potentially rising next year, and the positive holiday seasonality.
I would say the bulls still have the advantage, but when the turn comes it could happen quickly. Will it be a news event, economic news, the New Year / new direction, or just a capitulation type of an ending to the rally? Historically markets like this will run much longer than we expect, but like we saw last February, things can change in a hurry.
The S&P 500 (C-fund) nearly made a new intraday and closing high after a post FOMC meeting rally, but stocks dipped back slightly into the close preventing it. These small consolidations that we've seen (red horizontal lines) have broken out for the most part each time when they've tested the prior high. Meanwhile, the rising trading channel is intact and the S&P 500 is right about in the middle of that rising range so there is room for the rally to continue to test the top of the range, or retest the the support below. Just remember that these "F" flags do tend to eventually break down, and they can be sharp declines, but you never know when it will happen.
The DWCPF Index / S-fund continues to push higher, despite a small loss yesterday, and the rising channel seems to be get even more narrow. I'm expecting some kind of rollover like we saw in October, but can that happen during the normal Santa Claus rally week, or will we be waiting until 2021 before that happens?
The EFA / I-fund made another new high as the dollar made a new low. Both are extended at this point.
The Dow Transportation Index was the first to breakdown from its steep rising support line, and now it appears to be creating a possible bear flag, which tend to break down. It's a little early to say. We saw a similar mini-bear flag in November and that one actually broke to the upside. Will the broken support line make this one behave more like a typical bear flag?
The VIX may have already abandoned its new rising trading channel. We might blame that on the Fed as traders tend to get more bullish around an FOMC meeting, but now that it is behind us and we didn't get a big rally in stocks after the Fed yesterday, we'll see where this wants to go.
BND (Bonds / F-fund) was down slightly yesterday but remains in a favorable position above that bull flag. After the 50-day EMA held as support earlier in the month, the 20-day EMA has been holding for the last week, which appears bullish for bonds.
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.
