We got a nice holiday feel rally on Friday, maybe the first day that felt that way with volume dried up despite the full day of trading. The bulls took advantage and put together a nice rally. This week could be similar but when trading volume is light, headlines can push the market around fairly easily so the Santa Claus rally will be at the mercy of those headlines, which will hopefully be on the muted side. For the week we saw slight to minor losses in stocks, although the I-fund continues to lead and did post a solid gain last week.
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My personal plan this week, after celebrating Christmas, was to travel back to my place on Wednesday. Instead, I woke up on Monday to start writing this Tuesday commentary, but checked the weather and realized that I am going to have to leave as soon as I am finished with this to beat the snow. I don't know how many folks are paying attention during this holiday week, but this may be a quick one so I can get going, and I'll be back on my normal schedule on Tuesday.
You're probably sick of these charts but at this time of the year these are almost the best analysis you can have. As I have said before, bull market, bear market, choppy market, it doesn't seem to matter, stocks tend to like this quiet trading environment during the last week of the year.
Chart provided courtesy of www.sentimentrader.com
And, in true broken record form, I will repeat that in more recent years this week has had a tendency to go in the opposite direction of the week before Christmas. That would be slightly positive since last week we did see a small 0.17% loss for the S&P 500 so that may not be much of a factor.
Chart provided courtesy of www.sentimentrader.com
Next week will be different however. The first two trading days of the ew Year can be explosive, and it is not an easy thing to predict. We've seen big rallies on the first day of trading in the New Year, and a complete reversal on the 2nd day, so you almost have to go into the New Year expecting to be whipsawed.
The first two days of the New Year have a great record as far as the average gain, but make note that January 3rd and 4th have both up less than 50% of the time in the last 30 years. This year January 3rd is the first trading day of the New Year because of the way the holiday falls on the weekend, so it may act more like January 2nd on this chart, which is more typically the first trading day in January.
Chart provided courtesy of www.sentimentrader.com
We haven't seen any high volume capitulation-type sell offs that signal a more traditional bear market low so I think the odds of continued weakness early next year is likely. The charts look vulnerable so I won't jump in front of this bear market freight train right away in January, but I'm open to a change coming.
Investor sentiment has been so negative, especially those TV pundits, and everyone is calling for weakness and a recession for next year, and when everyone is leaning one way, it's not typical that they will all be correct, so I would not be completely surprised if things do get better next year.
February 1st would be the next time the Fed would have to make a decision on interest rates so we get a full month without their intervention but rather our own speculations about what they will do, so every economic / inflation related report in the interim will be the catalysts.
During that February 1 meeting we could be presented with a fork in the road. A road with more interest rate hikes on the table, or a road where the Fed suggests that inflation is under control and future interest rate hikes may be no longer needed. That may pave the path for the next big move in stocks.
Admin Note: Don't forget to login to the TSP Talk AutoTracker if you haven't for a while. Accounts that have been idle for too long won't rollover into the New Year. I'll remind everyone again during the week before New Year's but in case you won't be around, here is your reminder. If you are not already on the AutoTracker, this is a good time to start so that we track your full year in 2023. It's free. More info on creating a new account: AutoTracker - How to get started
The S&P 500 (C-fund) has been hanging around the area that used to be an open gap created by the November CPI report. The positive reversal last Thursday may have triggered a short-term low, but I think after this week that won't be as big of a factor. Any more upside from here would be facing resistance in the 3850 area which is the top of that open gap, and then more stiff resistance in the 3900 area which has been a key level for months. It also happens to be where the 50-day EMA is sitting.
The weekly chart of the S&P 500 doesn't look a whole lot better. There was a positive reversal candle made last week, which can be a bullish sign for at least early this week, but you can see that the long term downtrend is still very much intact and there would have to be a lot of positive things happening in the coming weeks to change that. That's not impossible and the New year could potentially change things, but I would have to say that the bears still have control unless and until the bulls change the complexion of the trading atmosphere. There's only been one close above the 40-week EMA since last March.
The DWCPF (S-fund) and the EFA / I-fund will likely tag along in the direction of the S&P 500, with the I-fund more impacted by the movement in the dollar.
BND (Bonds / F-fund) was down sharply on Friday and the recent pullback in bond yields seems to have ended and the uptrend has resumed, which may not be good news for the F-fund, so that's the technical analysis justification for being bearish on bonds. Fundamentally however, I believe 2023 will bring lesser inflation and more growth concerns, and that could turn these charts around next year.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much 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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My personal plan this week, after celebrating Christmas, was to travel back to my place on Wednesday. Instead, I woke up on Monday to start writing this Tuesday commentary, but checked the weather and realized that I am going to have to leave as soon as I am finished with this to beat the snow. I don't know how many folks are paying attention during this holiday week, but this may be a quick one so I can get going, and I'll be back on my normal schedule on Tuesday.
You're probably sick of these charts but at this time of the year these are almost the best analysis you can have. As I have said before, bull market, bear market, choppy market, it doesn't seem to matter, stocks tend to like this quiet trading environment during the last week of the year.
Chart provided courtesy of www.sentimentrader.com
And, in true broken record form, I will repeat that in more recent years this week has had a tendency to go in the opposite direction of the week before Christmas. That would be slightly positive since last week we did see a small 0.17% loss for the S&P 500 so that may not be much of a factor.
Chart provided courtesy of www.sentimentrader.com
Next week will be different however. The first two trading days of the ew Year can be explosive, and it is not an easy thing to predict. We've seen big rallies on the first day of trading in the New Year, and a complete reversal on the 2nd day, so you almost have to go into the New Year expecting to be whipsawed.
The first two days of the New Year have a great record as far as the average gain, but make note that January 3rd and 4th have both up less than 50% of the time in the last 30 years. This year January 3rd is the first trading day of the New Year because of the way the holiday falls on the weekend, so it may act more like January 2nd on this chart, which is more typically the first trading day in January.
Chart provided courtesy of www.sentimentrader.com
We haven't seen any high volume capitulation-type sell offs that signal a more traditional bear market low so I think the odds of continued weakness early next year is likely. The charts look vulnerable so I won't jump in front of this bear market freight train right away in January, but I'm open to a change coming.
Investor sentiment has been so negative, especially those TV pundits, and everyone is calling for weakness and a recession for next year, and when everyone is leaning one way, it's not typical that they will all be correct, so I would not be completely surprised if things do get better next year.
February 1st would be the next time the Fed would have to make a decision on interest rates so we get a full month without their intervention but rather our own speculations about what they will do, so every economic / inflation related report in the interim will be the catalysts.
During that February 1 meeting we could be presented with a fork in the road. A road with more interest rate hikes on the table, or a road where the Fed suggests that inflation is under control and future interest rate hikes may be no longer needed. That may pave the path for the next big move in stocks.
Admin Note: Don't forget to login to the TSP Talk AutoTracker if you haven't for a while. Accounts that have been idle for too long won't rollover into the New Year. I'll remind everyone again during the week before New Year's but in case you won't be around, here is your reminder. If you are not already on the AutoTracker, this is a good time to start so that we track your full year in 2023. It's free. More info on creating a new account: AutoTracker - How to get started
The S&P 500 (C-fund) has been hanging around the area that used to be an open gap created by the November CPI report. The positive reversal last Thursday may have triggered a short-term low, but I think after this week that won't be as big of a factor. Any more upside from here would be facing resistance in the 3850 area which is the top of that open gap, and then more stiff resistance in the 3900 area which has been a key level for months. It also happens to be where the 50-day EMA is sitting.
The weekly chart of the S&P 500 doesn't look a whole lot better. There was a positive reversal candle made last week, which can be a bullish sign for at least early this week, but you can see that the long term downtrend is still very much intact and there would have to be a lot of positive things happening in the coming weeks to change that. That's not impossible and the New year could potentially change things, but I would have to say that the bears still have control unless and until the bulls change the complexion of the trading atmosphere. There's only been one close above the 40-week EMA since last March.
The DWCPF (S-fund) and the EFA / I-fund will likely tag along in the direction of the S&P 500, with the I-fund more impacted by the movement in the dollar.
BND (Bonds / F-fund) was down sharply on Friday and the recent pullback in bond yields seems to have ended and the uptrend has resumed, which may not be good news for the F-fund, so that's the technical analysis justification for being bearish on bonds. Fundamentally however, I believe 2023 will bring lesser inflation and more growth concerns, and that could turn these charts around next year.
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
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much 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.
