The stock indices were mostly higher on Monday with some performing much better than others as we saw some rebalancing going on from money managers, and the light trading may have made it more pronounced. The Dow gained over 200-points, the S&P 500, Nasdaq, and even the I-fund were all up nicely, but small caps were down sharply, and the Transports were flat.
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I've mentioned a few seasonal tendencies that occur this time of the year, and one of them I've noticed in recent years was that if stocks were up the week before Christmas, then were often down the week after, and vice versa. Last week the S&P 500 and I-fund were down for the week while small caps were up. This week started out on the opposite side with small caps being the lone loser yesterday. Of course the Russell 2000 small caps index has had an extraordinary quarter so there may have been reason for some profit taking and rebalancing of accounts heading into the New Year, because many money managers must have been quite heavily weighted in the small companies after the big gains.
As you'll see in the charts below, after two down days in a row, the S-fund chart is testing some serious support so it is almost due or die time there. By the way, it was the first two day losing streak for the S-fund since October, if you can believe that.
There's three days of trading to go in the week, month, and year, and who knows how it will play out, but historically this is the traditional Santa Claus rally period. It's from Christmas Eve until the second trading day of the New Year, but since everyone knew that to be the case, it got a little thinned out over the years so many, including myself, use December 21st as the starting day. But no matter how you define it, this week is historically good - unless perhaps we get that flip flop action that has been more prevalent in recent years.
Chart provided courtesy of www.sentimentrader.com
Everyone is of course always looking for an edge, and that's why things change. Take the January Effect, which was names for the fact that small caps tended to outperform in January. Once that was on everyone's radar, it started to move into December, so tendencies can, and do, change.
Internally yesterday it wasn't as positive as it looked as much of the gains were in the large tech stocks again while the breadth on the NYSE was skewed to the downside, despite big gains in the Dow and S&P 500. These negative divergences haven't meant a whole lot to the broader market in recent months, but I don;t know if that means we should be ignoring it.
The $2000 per person stimulus deal passed the House yesterday evening, but it has to go through the Senate where changes are expected.
Administrative Note: We're planning another annual subscription sale for our premium services starting in January. As always, 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. I'll send an email reminder at the end of the week.
The S&P 500 (C-fund) gapped up, and in the case of the large caps, they held onto those morning gains, leaving that open gap. New highs were made as the bears were still home eating their fruit cakes.
However, the money mangers seemed to be moving out of the smaller stocks that did so well in the final quarter and since the March lows, that they had to take a day to rebalance their portfolios so the DWCPF Index / S-fund took one on the chin on Monday. That could be a one day event, I don't know, because small caps tend to do well during this week historically. That was the first 2 day losing streak in about two months and you can see that support is being tested again after holding several times.
EFA / I-fund was up solidly despite the dollar being flat on the day. It nearly made a new high, and there could be some double top issues there. But that breakout back above the old support line is a healthy move.
The Dow Transportation Index shows a couple of bearish looking flags and the next move could be quite important because it may also just be forming a base off that prior all time high earlier this month.
The HYG, High Yield Corporate Bond Fund, made a new all-time high yesterday, and that's a decent bullish sign for stocks. It also remained above some key support that it fell below early last week.
BND (Bonds / F-fund) was down slightly yesterday but remains near the top of the recent range between 87.50 and about 88.
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="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[TD]
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[TD="align: center"]
[/TR]
[/TABLE]
I've mentioned a few seasonal tendencies that occur this time of the year, and one of them I've noticed in recent years was that if stocks were up the week before Christmas, then were often down the week after, and vice versa. Last week the S&P 500 and I-fund were down for the week while small caps were up. This week started out on the opposite side with small caps being the lone loser yesterday. Of course the Russell 2000 small caps index has had an extraordinary quarter so there may have been reason for some profit taking and rebalancing of accounts heading into the New Year, because many money managers must have been quite heavily weighted in the small companies after the big gains.
As you'll see in the charts below, after two down days in a row, the S-fund chart is testing some serious support so it is almost due or die time there. By the way, it was the first two day losing streak for the S-fund since October, if you can believe that.
There's three days of trading to go in the week, month, and year, and who knows how it will play out, but historically this is the traditional Santa Claus rally period. It's from Christmas Eve until the second trading day of the New Year, but since everyone knew that to be the case, it got a little thinned out over the years so many, including myself, use December 21st as the starting day. But no matter how you define it, this week is historically good - unless perhaps we get that flip flop action that has been more prevalent in recent years.
Chart provided courtesy of www.sentimentrader.com
Everyone is of course always looking for an edge, and that's why things change. Take the January Effect, which was names for the fact that small caps tended to outperform in January. Once that was on everyone's radar, it started to move into December, so tendencies can, and do, change.
Internally yesterday it wasn't as positive as it looked as much of the gains were in the large tech stocks again while the breadth on the NYSE was skewed to the downside, despite big gains in the Dow and S&P 500. These negative divergences haven't meant a whole lot to the broader market in recent months, but I don;t know if that means we should be ignoring it.
The $2000 per person stimulus deal passed the House yesterday evening, but it has to go through the Senate where changes are expected.
Administrative Note: We're planning another annual subscription sale for our premium services starting in January. As always, 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. I'll send an email reminder at the end of the week.
The S&P 500 (C-fund) gapped up, and in the case of the large caps, they held onto those morning gains, leaving that open gap. New highs were made as the bears were still home eating their fruit cakes.
However, the money mangers seemed to be moving out of the smaller stocks that did so well in the final quarter and since the March lows, that they had to take a day to rebalance their portfolios so the DWCPF Index / S-fund took one on the chin on Monday. That could be a one day event, I don't know, because small caps tend to do well during this week historically. That was the first 2 day losing streak in about two months and you can see that support is being tested again after holding several times.
EFA / I-fund was up solidly despite the dollar being flat on the day. It nearly made a new high, and there could be some double top issues there. But that breakout back above the old support line is a healthy move.
The Dow Transportation Index shows a couple of bearish looking flags and the next move could be quite important because it may also just be forming a base off that prior all time high earlier this month.
The HYG, High Yield Corporate Bond Fund, made a new all-time high yesterday, and that's a decent bullish sign for stocks. It also remained above some key support that it fell below early last week.
BND (Bonds / F-fund) was down slightly yesterday but remains near the top of the recent range between 87.50 and about 88.
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.
