It was quite an interesting day for stocks yesterday as the Georgia elections caused a stir in the overnight futures as investors looked to reallocate to more democratic friendly sectors. The futures were mixed with large caps, and particularly large tech, down sharply while the small caps were surging. The open bell hit and things flipped more positive, but the D.C. protests did pull the indices off their highs later in the day. The Dow ended with a big gain of 438-points, the S&P added 0.57%, the Nasdaq was down 0.61%and small caps held onto a gain of over 2%, as far as our S-fund goes. The Russell small cap index gained about 4%. Bonds were down.
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The initial reaction to the election was as we thought possible with the democratic sweep as stock futures fell overnight, but as we said, the small caps rallied. The protests in D.C. also shook things up a bit, sending the Nasdaq back into the red and the S&P 500, which was up 56-points at the highs, closed up 'just' 21. Everything seems to be coming up roses for the market. Good news, bad news, emotional news, election results, COVID cases up or down, strong economic data or weak, and it's is all likely because of the liquidity out there. It was one thing to get a nice bounce off those March 2020 lows, but soaring to new highs so easily in the current environment seems odd.
The bulls are loving it, but of course when you look at it from a different prospective, it tells us that we don't really have free markets anymore. We have a Federal Reserve and government run market. Whatever you think of that, the stock market seems just fine with it. But can that last?
Why not? The national debt goes up trillions of dollars each year, every year, for decades. Who cares? It's hurting the dollar, but so what? Interest rates in your bank pay close to 0%, who cares? The G-fund paid less than 1% for the first time ever last year. Well, just buy stocks instead. Don't have enough money to buy stocks? Borrow it. The NYSE Margin Debt is hitting all times highs too.
Chart provided courtesy of www.sentimentrader.com
It was 300K in 2000 (not shown) just before that bubble burst, and 416K at the top before the financial crisis. Now it's 722K.
With the democrats in complete charge now, stimulus and spending should increase, and the market is looking at that as a good thing for the economy in the short-term, but that money isn't free. It either becomes new debt or higher taxes. But somehow that adds up to stock prices going higher so why fight it, right?
I know I sound sour, but something doesn't feel right. This may not be a good comparison but let's say you're shopping downtown and some one throws a brick though a store front window. People start rushing in and taking the merchandise. It's free stuff, why not grab it, right? Most people would say it doesn't feel right to do that, but they're missing out. You would think that somebody is going to have to pay the price for that.
Well, the Fed and the government are breaking those windows for us and the stock market and people are jumping in and grabbing what they can right now. Will they pay the price down the road? Ah, don't worry about it. It will probably be our grandkids that will have to pay it back, so why not grab it? I hope the sarcasm is coming through.
The sad thing is, you almost have to go along or you get left behind. Even if you believe that the economy being treated this way could mean a big price to pay down the road, right now it is paying off so you have to decide whether to chase the gains, or hope for a pullback if you have any cash on hand.
After the bell the futures popped up some, getting back some of the late dip yesterday, and they opened later Wednesday evening a little higher, so the bulls are still in a buying mood.
Administrative Notes:
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.
The 2021 "Guess the Dow" contest for forum members is going on now and we'll accept guesses until 5 PM ET on Sunday January 10. The winner gets a $100 Amazon e-gift card. More here:
The S&P 500 (C-fund) flew back up to the top of that F-flag and pulled back to close more in the middle of the channel. This has been going on for some time, and like we said, they tend to go on longer than you think possible. However, F flags do tend to eventually break down. Tend to, not always. Right now typical market norms don't seem to be working.
The DWCPF (small caps / S-fund) exploded to the upside, and my assumption is that it was due to the possibility of more stimulus with the democrats' sweep. The top of the day's range hit the old support line that it broke down from last week. As of now, that's a failed breakout, but it's hard to call that anything but a good day.
The EFA (I-fund) rallied - dollar down - and new highs were made. It hit the top of the narrow rising channel, which is now about two months long.
The Dow Transportation Index broke out of what looks like a form of a bull flag, after finding support at the 50-day EMA earlier this week.
The VIX was actually up at one point yesterday when the mid afternoon selling started, but it settled down near 25 again. During the morning rally in stocks it had fallen to 22, but that support lines seems to have held again.
BND (Bonds / F-fund) broke down sharply as bond traders took the new possibility of more stimulus to assume the economy could grow faster, so yields rallied, and bond prices fell .
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 initial reaction to the election was as we thought possible with the democratic sweep as stock futures fell overnight, but as we said, the small caps rallied. The protests in D.C. also shook things up a bit, sending the Nasdaq back into the red and the S&P 500, which was up 56-points at the highs, closed up 'just' 21. Everything seems to be coming up roses for the market. Good news, bad news, emotional news, election results, COVID cases up or down, strong economic data or weak, and it's is all likely because of the liquidity out there. It was one thing to get a nice bounce off those March 2020 lows, but soaring to new highs so easily in the current environment seems odd.
The bulls are loving it, but of course when you look at it from a different prospective, it tells us that we don't really have free markets anymore. We have a Federal Reserve and government run market. Whatever you think of that, the stock market seems just fine with it. But can that last?
Why not? The national debt goes up trillions of dollars each year, every year, for decades. Who cares? It's hurting the dollar, but so what? Interest rates in your bank pay close to 0%, who cares? The G-fund paid less than 1% for the first time ever last year. Well, just buy stocks instead. Don't have enough money to buy stocks? Borrow it. The NYSE Margin Debt is hitting all times highs too.
Chart provided courtesy of www.sentimentrader.com
It was 300K in 2000 (not shown) just before that bubble burst, and 416K at the top before the financial crisis. Now it's 722K.
With the democrats in complete charge now, stimulus and spending should increase, and the market is looking at that as a good thing for the economy in the short-term, but that money isn't free. It either becomes new debt or higher taxes. But somehow that adds up to stock prices going higher so why fight it, right?
I know I sound sour, but something doesn't feel right. This may not be a good comparison but let's say you're shopping downtown and some one throws a brick though a store front window. People start rushing in and taking the merchandise. It's free stuff, why not grab it, right? Most people would say it doesn't feel right to do that, but they're missing out. You would think that somebody is going to have to pay the price for that.
Well, the Fed and the government are breaking those windows for us and the stock market and people are jumping in and grabbing what they can right now. Will they pay the price down the road? Ah, don't worry about it. It will probably be our grandkids that will have to pay it back, so why not grab it? I hope the sarcasm is coming through.
The sad thing is, you almost have to go along or you get left behind. Even if you believe that the economy being treated this way could mean a big price to pay down the road, right now it is paying off so you have to decide whether to chase the gains, or hope for a pullback if you have any cash on hand.
After the bell the futures popped up some, getting back some of the late dip yesterday, and they opened later Wednesday evening a little higher, so the bulls are still in a buying mood.
Administrative Notes:
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.
The 2021 "Guess the Dow" contest for forum members is going on now and we'll accept guesses until 5 PM ET on Sunday January 10. The winner gets a $100 Amazon e-gift card. More here:
The S&P 500 (C-fund) flew back up to the top of that F-flag and pulled back to close more in the middle of the channel. This has been going on for some time, and like we said, they tend to go on longer than you think possible. However, F flags do tend to eventually break down. Tend to, not always. Right now typical market norms don't seem to be working.
The DWCPF (small caps / S-fund) exploded to the upside, and my assumption is that it was due to the possibility of more stimulus with the democrats' sweep. The top of the day's range hit the old support line that it broke down from last week. As of now, that's a failed breakout, but it's hard to call that anything but a good day.
The EFA (I-fund) rallied - dollar down - and new highs were made. It hit the top of the narrow rising channel, which is now about two months long.
The Dow Transportation Index broke out of what looks like a form of a bull flag, after finding support at the 50-day EMA earlier this week.
The VIX was actually up at one point yesterday when the mid afternoon selling started, but it settled down near 25 again. During the morning rally in stocks it had fallen to 22, but that support lines seems to have held again.
BND (Bonds / F-fund) broke down sharply as bond traders took the new possibility of more stimulus to assume the economy could grow faster, so yields rallied, and bond prices fell .
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.
