More of the same for stocks yesterday as they continue to grind higher. The Dow gained back 104 of the 148-points it lost on Monday, but the S&P 500, Nasdaq, and small caps, all plowed higher into the close, after a weak open, and closed at new highs.
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The market is throwing us some contradictory reasons for it to continue to rally. On one hand we have the economic data improving greatly since the COVID spring / summer chaos, yet Wall Street continues to be thrown money from the Fed who says things are substantially uncertain.
We have vaccines coming out so stocks are rising because the outlook for 2021 looks good post-COVID, yet Wall Street is continuing to count on Washington to throw more stimulus at the economy because how much people are suffering.
We see small cap stocks soaring for months now, yet we're are seeing another round of lockdowns in small businesses in portions of the country.
So, which is it? The 2020 version of the old 1980's song, "The Future's So Bright, I Gotta Wear Shades," should be called, "The Future's So Bright, Brother Can You Spare a Dime?
There's a difference between, stocks are moving higher, and stocks need to be bought. If you're a buy and hold investor, it doesn't really matter. You're likely picking up new shares with each paycheck contribution you make, buying lower on the dips, and buying at the highs in the case of this market. If you're a market timer it's about opportunities. You are looking for good opportunities to buy, and good opportunities to sell.
Right now seems more like a good time to be taking some off the table if you own stocks, and down the road we'll get a better opportunity to buy. The problem is, we don't know when that opportunity will present itself, or when stocks will rollover.
I see this like the house having the advantage in a blackjack game. The stock market does give the edge to the bulls, since the very long term trend in the U.S. stock market has been up -- forever, and here we are near or at all time highs. Just like the casinos are built on their advantages. But if you are a card counter in blackjack, you know that there are times when the deck does not favor the house. When the decks are rich in high cards and aces, the advantage swings to the players, assuming correct play and sound betting.
Right now the stock market seems to be rich in high cards and aces, and the house may be getting ready for a little bit of a swing in the other direction. And as blackjack card counters know, the house doesn't lose every time the deck is rich in those cards, despite losing their edge. And that's what this market feels like now. The house is winning despite not having the advantage. But the higher stocks go, the more the house losing their advantage.
But fear not. The long term edge for the house and the market means another opportunity will come soon after those cards are played. For some of us who are on the sidelines (not in stocks), we are the players who are seeing the dealer get 20's and blackjack every time we have an advantage.
The S&P 500 (C-fund) posted a modest gain yesterday as those old resistance lines near 3675 continue to hold as support. The distance above the 50 and 200-day EMAs is getting absurd and one would have to think that a sideways consolidation would be the best we can expect going forward for the S&P 500, despite the strong December seasonality.
The DWCPF Index / S-fund is even more extreme with it being nearly 400-points above the 200-day EMA, or 25%. Amazing!
The EFA / I-fund broke below its wedge on Monday, battled back on Tuesday, but remains below the bottom of that wedge's support. There is certainly a lot of empty air below on this chart.
The VIX was down nearly 3% on the day, closing near recent lows. The low was made in late November and stocks have continued to grind higher despite that. We saw that back in August when the VIX bottomed about three weeks before the S&P 500 finally peaked.
BND (Bonds / F-fund) moved back above that descending trading channel (red) and may have formed a bullish looking flag with its recent consolidation after the November rally.
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 market is throwing us some contradictory reasons for it to continue to rally. On one hand we have the economic data improving greatly since the COVID spring / summer chaos, yet Wall Street continues to be thrown money from the Fed who says things are substantially uncertain.
We have vaccines coming out so stocks are rising because the outlook for 2021 looks good post-COVID, yet Wall Street is continuing to count on Washington to throw more stimulus at the economy because how much people are suffering.
We see small cap stocks soaring for months now, yet we're are seeing another round of lockdowns in small businesses in portions of the country.
So, which is it? The 2020 version of the old 1980's song, "The Future's So Bright, I Gotta Wear Shades," should be called, "The Future's So Bright, Brother Can You Spare a Dime?
There's a difference between, stocks are moving higher, and stocks need to be bought. If you're a buy and hold investor, it doesn't really matter. You're likely picking up new shares with each paycheck contribution you make, buying lower on the dips, and buying at the highs in the case of this market. If you're a market timer it's about opportunities. You are looking for good opportunities to buy, and good opportunities to sell.
Right now seems more like a good time to be taking some off the table if you own stocks, and down the road we'll get a better opportunity to buy. The problem is, we don't know when that opportunity will present itself, or when stocks will rollover.
I see this like the house having the advantage in a blackjack game. The stock market does give the edge to the bulls, since the very long term trend in the U.S. stock market has been up -- forever, and here we are near or at all time highs. Just like the casinos are built on their advantages. But if you are a card counter in blackjack, you know that there are times when the deck does not favor the house. When the decks are rich in high cards and aces, the advantage swings to the players, assuming correct play and sound betting.
Right now the stock market seems to be rich in high cards and aces, and the house may be getting ready for a little bit of a swing in the other direction. And as blackjack card counters know, the house doesn't lose every time the deck is rich in those cards, despite losing their edge. And that's what this market feels like now. The house is winning despite not having the advantage. But the higher stocks go, the more the house losing their advantage.
But fear not. The long term edge for the house and the market means another opportunity will come soon after those cards are played. For some of us who are on the sidelines (not in stocks), we are the players who are seeing the dealer get 20's and blackjack every time we have an advantage.
The S&P 500 (C-fund) posted a modest gain yesterday as those old resistance lines near 3675 continue to hold as support. The distance above the 50 and 200-day EMAs is getting absurd and one would have to think that a sideways consolidation would be the best we can expect going forward for the S&P 500, despite the strong December seasonality.
The DWCPF Index / S-fund is even more extreme with it being nearly 400-points above the 200-day EMA, or 25%. Amazing!
The EFA / I-fund broke below its wedge on Monday, battled back on Tuesday, but remains below the bottom of that wedge's support. There is certainly a lot of empty air below on this chart.
The VIX was down nearly 3% on the day, closing near recent lows. The low was made in late November and stocks have continued to grind higher despite that. We saw that back in August when the VIX bottomed about three weeks before the S&P 500 finally peaked.
BND (Bonds / F-fund) moved back above that descending trading channel (red) and may have formed a bullish looking flag with its recent consolidation after the November rally.
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.
