A broad rally on Wall Street on Tuesday snapped the 4-day dip in the S&P 500, and the headlines suggested the reason for the rally was "stimulus optimism." I'm not sure how many times the market can rally on stimulus rumors, but it seems to be what investors want to hear. The Dow gained 338-points and gains were broad across most sectors. Small caps continue to lead with another big gain yesterday.
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Four straight down days in the S&P 500 led to the recent pullback of a whopping 1.5%, so the dip buyers remain in FOMO mode, probably trying to find any reason to buy again before the typical Santa Claus rally. We've talked about it before and historically it's almost always a good idea to be invested from December 21 into the first week of the New Year, but of course there are some glaring exceptions over the years.
After those four down days, we got the big pop yesterday, and the December seasonality chart does show this is typical action this time of December. Buying a 1.5% dip is not my idea of a buying opportunity, but perhaps that's the best December will give us?
Chart provided courtesy of www.sentimentrader.com
I was thinking we would see some stiffer tax selling in the latter half of the month, just in case a Biden administration raises capital gains taxes next year, and obviously that didn't happen yesterday.
Common sense tells me that things have come too far, but the Fed and stimulus is just too enticing for investors and fund managers, so a common sense approach doesn't seem to be working. Of course all of this easy money is killing the dollar, and that does increase the prices of anything that sells in dollars including stocks, bitcoin, housing, etc.
Surprisingly gold hasn't been doing all that well in recent months, although it has had a nice bounce in December, so the weak dollar is affecting almost everything.
Technically, most of the stock charts look very good and that makes it tough because we've talked about the historically high valuations stocks have right now, the craziness in the IPO market, the extreme bullishness that we've seen from investors, and none of that seems to matter... until it does. At some point a switch will flip and the market will take on a different tone. When that might happen and what would trigger that is anyone's guess, but it will eventually happen. And the further the indices stretch to the upside without a meaningful pullback (even just 5% or so) the more likely that the sell off, when it comes, will be extreme and would be tough to avoid if you're in stocks. The crowd that is jamming themselves into the market at these lofty levels, could all be looking for the exit at the same time.
With stocks at all time highs it's tough to argue with the buy and hold strategy. Your account would be at its highest level ever at this point, although you would have had to endure some major declines in the process. Of course a few well times trades can really make a difference - good or bad. I don't know if you follow the accounts on our AutoTracker, but the leader in 2020 is now up 100% for the year, and that was with just one well timed (or lucky) IFT. And there are several who are above 50 and 60%. The bad news is, poorly timed trades can really hurt.
Today is day two of the two day FOMC meeting. There are no expected changes to interest rates, but the Fed policy statement can always be a market mover, and that should be released at about 2 PM ET today.
Admin Note: FYI, I got this from one of our third party email services that could effect email alerts:
"Some customers are experiencing high bounces for their gmail addresses. This is due to a technical issue on Gmail's side. To prevent additional bounces, email delivery to Gmail has been delayed and will not be sent until Gmail's issues have subsided. We apologize for this inconvenience and we appreciate your patience!"
The S&P 500 (C-fund) jumped right back above the longer term resistance line that it fell below for three days. Technically, that's pretty strong action. I thought for sure Monday's gap up rally and failure was going to turn into exhaustion gap and start a potential slide. It still could but Tuesday's action certainly threw a wrench into that possibility. So now the trading channel is still intact as support held again, and the S&P 500 is just a a few points away from another new high.
The DWCPF Index / S-fund had another huge day and the long narrow rising trading channel continues to stretch. It is still nearly 400 points above its 200-day EMA, or about 25%, and if you listen closely you can just about hear that rubber band starting to fray.
The EFA / I-fund was up, and as I mentioned above, the dollar tanked so the rally continued.
The Dow Transportation Index chart is one that isn't looking overly great. It broke down recently in a much needed pullback. It rallied nicely yesterday but the technical damage may have already begun. A move down to the 12,000 could satisfy the bears as a possible opportunity, but the 200-day EMA isn't even in the picture so if that support doesn't hold, there's a lot more room to fall - but I'm getting ahead of things here.
The VIX was down sharply yesterday with the Dow gaining over 300-points, but it does remain in a new ascending channel after breaking above the descending channel last week.
BND (Bonds / F-fund) continues to hold above that bull flag suggesting the bond market is on the bullish side. Bullish bonds generally mean bearish yields and I would think that yields would only go down at this point on economic concerns.
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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[/TD]
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[/TR]
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Four straight down days in the S&P 500 led to the recent pullback of a whopping 1.5%, so the dip buyers remain in FOMO mode, probably trying to find any reason to buy again before the typical Santa Claus rally. We've talked about it before and historically it's almost always a good idea to be invested from December 21 into the first week of the New Year, but of course there are some glaring exceptions over the years.
After those four down days, we got the big pop yesterday, and the December seasonality chart does show this is typical action this time of December. Buying a 1.5% dip is not my idea of a buying opportunity, but perhaps that's the best December will give us?
Chart provided courtesy of www.sentimentrader.com
I was thinking we would see some stiffer tax selling in the latter half of the month, just in case a Biden administration raises capital gains taxes next year, and obviously that didn't happen yesterday.
Common sense tells me that things have come too far, but the Fed and stimulus is just too enticing for investors and fund managers, so a common sense approach doesn't seem to be working. Of course all of this easy money is killing the dollar, and that does increase the prices of anything that sells in dollars including stocks, bitcoin, housing, etc.
Surprisingly gold hasn't been doing all that well in recent months, although it has had a nice bounce in December, so the weak dollar is affecting almost everything.
Technically, most of the stock charts look very good and that makes it tough because we've talked about the historically high valuations stocks have right now, the craziness in the IPO market, the extreme bullishness that we've seen from investors, and none of that seems to matter... until it does. At some point a switch will flip and the market will take on a different tone. When that might happen and what would trigger that is anyone's guess, but it will eventually happen. And the further the indices stretch to the upside without a meaningful pullback (even just 5% or so) the more likely that the sell off, when it comes, will be extreme and would be tough to avoid if you're in stocks. The crowd that is jamming themselves into the market at these lofty levels, could all be looking for the exit at the same time.
With stocks at all time highs it's tough to argue with the buy and hold strategy. Your account would be at its highest level ever at this point, although you would have had to endure some major declines in the process. Of course a few well times trades can really make a difference - good or bad. I don't know if you follow the accounts on our AutoTracker, but the leader in 2020 is now up 100% for the year, and that was with just one well timed (or lucky) IFT. And there are several who are above 50 and 60%. The bad news is, poorly timed trades can really hurt.
Today is day two of the two day FOMC meeting. There are no expected changes to interest rates, but the Fed policy statement can always be a market mover, and that should be released at about 2 PM ET today.
Admin Note: FYI, I got this from one of our third party email services that could effect email alerts:
"Some customers are experiencing high bounces for their gmail addresses. This is due to a technical issue on Gmail's side. To prevent additional bounces, email delivery to Gmail has been delayed and will not be sent until Gmail's issues have subsided. We apologize for this inconvenience and we appreciate your patience!"
The S&P 500 (C-fund) jumped right back above the longer term resistance line that it fell below for three days. Technically, that's pretty strong action. I thought for sure Monday's gap up rally and failure was going to turn into exhaustion gap and start a potential slide. It still could but Tuesday's action certainly threw a wrench into that possibility. So now the trading channel is still intact as support held again, and the S&P 500 is just a a few points away from another new high.
The DWCPF Index / S-fund had another huge day and the long narrow rising trading channel continues to stretch. It is still nearly 400 points above its 200-day EMA, or about 25%, and if you listen closely you can just about hear that rubber band starting to fray.
The EFA / I-fund was up, and as I mentioned above, the dollar tanked so the rally continued.
The Dow Transportation Index chart is one that isn't looking overly great. It broke down recently in a much needed pullback. It rallied nicely yesterday but the technical damage may have already begun. A move down to the 12,000 could satisfy the bears as a possible opportunity, but the 200-day EMA isn't even in the picture so if that support doesn't hold, there's a lot more room to fall - but I'm getting ahead of things here.
The VIX was down sharply yesterday with the Dow gaining over 300-points, but it does remain in a new ascending channel after breaking above the descending channel last week.
BND (Bonds / F-fund) continues to hold above that bull flag suggesting the bond market is on the bullish side. Bullish bonds generally mean bearish yields and I would think that yields would only go down at this point on economic concerns.
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.
