It was quite the slog, but the small and mid caps managed to close the 7-day Santa Claus Rally period with a gain of over 1% on Friday. The Russell 2000 gained 1.36% and the S-fund gained just over 1%, the only TSP fund to gain 1% during that period. The C-fund was actually down half of a percent for those 7-days so the Santa Claus Rally was certainly overhyped this year, and I am guilty of doing that. The big gains on Friday, especially in the S-fund, did help save a little face. Now what?
You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
Here are the final returns for the stock and bond TSP funds for the 7-day Santa Claus Rally period.
Ok, so we may have overplayed our hand but there was a lot going on leading up to, and during the normal 7-day trading period called the Santa Claus Rally. The average gain for the S&P 500 during that period since 1950 is 1.3%, and +1.6% if we go back to 1928. In more recent years it hasn't been that good and perhaps it is because we all expected it and did all of our buying before it began? It's could be a case of the old, "buy the rumor, sell the news" effect.
The C-fund was the main attraction in 2024, but more recently it has been the Small Caps and the S-fund that has have captured the attention of TSP investors after a 12% gain in November and a 7% loss in December, but that's all rear-view mirror information and we have to look forward, so let's take a look.
The DWCPF (S-fund) chart has the head and shoulder pattern that I have mentioned last week. At the risk of repeating myself, these formations are considered continuation patterns. They can be very bearish in a negatively trending market, but when the chart is trending upward, it can easily find support and rebound off the neckline. So far that has been the case, but let's dig deeper.
The rally off the right shoulder of the head and shoulders pattern has stalled twice at the 50-day EMA and that also happens to form a nasty looking bear flag. This can't be good, can it?
Not usually, but take a look above at prior bearish flags on the DWCPF that fell below the 50-day EMA in the last year. Every one bounced back and turned out fine.
Of course we could be pressing our luck to expect it again, but one thing the stock market tells us is that patterns tend to repeat, until they don't, so betting against the S-fund may not be wise, but if this does fail, we know there were some signs. The question is if 2025 will be the same or different than these fortuitous 2024 rebounds off of weak chart patterns in the S-fund.
The level of bond yields doesn't necessarily impact the direction of the stock market, but rather the direction that yields are moving. In November yields were falling and in December they rebounded, and the S-fund moved almost proportionately in the opposite direction. Now the 10-year Treasury Yield has formed a small bull flag suggesting a breakout to the upside.
However, the longer term chart of the 10-year shows some possible resistance in the area near 4.6%. That descending channel could also be a large bull flag itself, so there are a lot of possibilities and questions for the short-term. This yield could come all the way down again to the bottom of the flag or it could breakout above the flag, and depending on which occurs first, the stock market, and particularly the S-fund, will be at the mercy of that move.
Last year it was the C-fund that performed best and the I-fund was well behind the US funds. It's possible that this is the year that they trade places, but if the 2024 strength in the dollar continues, that would be a tough situation for the I-fund again.
While the S&P 500 tends to do well following a year when it is up 20% or more, there are some weak setups when looking at the recent negative breadth of the market (more stocks down than up) when so close to all time highs, and the question is whether small caps or the I-fund can do well if the C-fund does struggle.
We'll get the December jobs report on Friday and on Thursday the stock market and TSP will be closed in observance of the national day of mourning for Jimmy Carter so we will take the day off as well.
Get in on the Guess the Dow Contest for 2025. A $100 Amazon eGift Card goes to whoever comes closest to guessing the Dow Jones Industrial Average's closing price on Dec 31, 2025. The deadline to enter is Tuesday Jan 7, at 7 PM ET. You must be a TSP Talk forum member to enter.
Also, I plan to start a sale on annual premium subscriptions when I get some time this week, or next.
The S&P 500 (C-fund) found some support on January 2nd before it start to rebound, and that rebound was followed up on Friday the 3rd with a big rally. We have the head and shoulders pattern but the jury is still out on whether this is bearish or if it is going to be the continuation pattern that we often see when they form in a larger positive trending market. The gap from after the election remains open near 5775 and is still a target for any eventual correction this year. The Santa Claus Rally is officially over and now the question is whether the bullish January Effect can keep the bulls in charge.
ACWX (the I-fund tracking index) was up 0.54% on Friday and the I-fund was given a gain of 0.42%. If the dollar (UUP) continues to trend higher, I don't see this as a fund that can keep up with the US funds. However, should the dollar finally peak, that would change everything.
BND (bonds / F-fund) continues to look awful as it flirts with a major breakdown. Yields will have to stabilize and eventually rollover if bonds and the F-fund become a viable play over stocks.
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.php
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.
| Daily TSP Funds Return
More returns |
You can see the latest updated TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php
Here are the final returns for the stock and bond TSP funds for the 7-day Santa Claus Rally period.
Ok, so we may have overplayed our hand but there was a lot going on leading up to, and during the normal 7-day trading period called the Santa Claus Rally. The average gain for the S&P 500 during that period since 1950 is 1.3%, and +1.6% if we go back to 1928. In more recent years it hasn't been that good and perhaps it is because we all expected it and did all of our buying before it began? It's could be a case of the old, "buy the rumor, sell the news" effect.
The C-fund was the main attraction in 2024, but more recently it has been the Small Caps and the S-fund that has have captured the attention of TSP investors after a 12% gain in November and a 7% loss in December, but that's all rear-view mirror information and we have to look forward, so let's take a look.
The DWCPF (S-fund) chart has the head and shoulder pattern that I have mentioned last week. At the risk of repeating myself, these formations are considered continuation patterns. They can be very bearish in a negatively trending market, but when the chart is trending upward, it can easily find support and rebound off the neckline. So far that has been the case, but let's dig deeper.
The rally off the right shoulder of the head and shoulders pattern has stalled twice at the 50-day EMA and that also happens to form a nasty looking bear flag. This can't be good, can it?
Not usually, but take a look above at prior bearish flags on the DWCPF that fell below the 50-day EMA in the last year. Every one bounced back and turned out fine.
Of course we could be pressing our luck to expect it again, but one thing the stock market tells us is that patterns tend to repeat, until they don't, so betting against the S-fund may not be wise, but if this does fail, we know there were some signs. The question is if 2025 will be the same or different than these fortuitous 2024 rebounds off of weak chart patterns in the S-fund.
The level of bond yields doesn't necessarily impact the direction of the stock market, but rather the direction that yields are moving. In November yields were falling and in December they rebounded, and the S-fund moved almost proportionately in the opposite direction. Now the 10-year Treasury Yield has formed a small bull flag suggesting a breakout to the upside.
However, the longer term chart of the 10-year shows some possible resistance in the area near 4.6%. That descending channel could also be a large bull flag itself, so there are a lot of possibilities and questions for the short-term. This yield could come all the way down again to the bottom of the flag or it could breakout above the flag, and depending on which occurs first, the stock market, and particularly the S-fund, will be at the mercy of that move.
Last year it was the C-fund that performed best and the I-fund was well behind the US funds. It's possible that this is the year that they trade places, but if the 2024 strength in the dollar continues, that would be a tough situation for the I-fund again.
While the S&P 500 tends to do well following a year when it is up 20% or more, there are some weak setups when looking at the recent negative breadth of the market (more stocks down than up) when so close to all time highs, and the question is whether small caps or the I-fund can do well if the C-fund does struggle.
We'll get the December jobs report on Friday and on Thursday the stock market and TSP will be closed in observance of the national day of mourning for Jimmy Carter so we will take the day off as well.
Get in on the Guess the Dow Contest for 2025. A $100 Amazon eGift Card goes to whoever comes closest to guessing the Dow Jones Industrial Average's closing price on Dec 31, 2025. The deadline to enter is Tuesday Jan 7, at 7 PM ET. You must be a TSP Talk forum member to enter.
Also, I plan to start a sale on annual premium subscriptions when I get some time this week, or next.
The S&P 500 (C-fund) found some support on January 2nd before it start to rebound, and that rebound was followed up on Friday the 3rd with a big rally. We have the head and shoulders pattern but the jury is still out on whether this is bearish or if it is going to be the continuation pattern that we often see when they form in a larger positive trending market. The gap from after the election remains open near 5775 and is still a target for any eventual correction this year. The Santa Claus Rally is officially over and now the question is whether the bullish January Effect can keep the bulls in charge.
ACWX (the I-fund tracking index) was up 0.54% on Friday and the I-fund was given a gain of 0.42%. If the dollar (UUP) continues to trend higher, I don't see this as a fund that can keep up with the US funds. However, should the dollar finally peak, that would change everything.
BND (bonds / F-fund) continues to look awful as it flirts with a major breakdown. Yields will have to stabilize and eventually rollover if bonds and the F-fund become a viable play over stocks.
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.php
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.
