TSP Talk - The bears are starting to growl

The bulls made a few attempts on Tuesday, but the bears kept the pressure on and the indices ended the day decisively negative for a second straight day. Many big tech stocks had success yesterday as they may have become to go to options when investors are looking to play defense. Unfortunately they closed weakly and may have created a negative reversal day, but it could just be nerves before today's CPI report.

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The wall of worry is growing and sentiment is slipping more into the bearish camp, but that may be just what is needed for a late December rally. While it is happening however, it is natural for investors to want to abandon the bullish ship. That may work for a little while, but I don't think the bulls are done yet. The charts may prove me wrong eventually, but until they do, I'll stick with history which suggests Decembers do well during election years, but maybe not until later in the month.

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And what about next year? I found this data from @TrendSpider on X.com.

Going back 50 years, here is the average S&P 500 return by month during the year AFTER an election, and the total annual return based on those monthly average: It looks like the typical bearish culprits of February, August and September.

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The Fed gets together again next week and the odds are they will be cutting the Fed Funds Rate on the 18th.

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Those averages could change after this week's inflation data as we get the CPI report today, and the PPI Producer Prices report on Thursday. The Fed's favorite inflation report is the PCE Prices data, but that report won't come out again until the 20th, two days after their decision, but the PPI report is a good tell for the PCE data.

Again, this pullback in mid-December isn't too surprising, and the question was whether we wanted to try to step aside and assume this weakness, and hope to jump back in before the late December Santa Claus rally. So far, those who have tried to time it are being rewarded by missing some or all of this week's losses.





The S&P 500 (C-fund) broke below some rising support, and it may now look to the early November peak or the 20-day EMA to hold. Otherwise, the bottom of the red channel is all the way down near 5900, so we'll have to wait and see how much growling the bears can do, knowing that the highly anticipated, but not guaranteed, Santa Claus rally is just around the corner.

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DWCPF (S-fund) is back into lagging mode as it fell below some support yesterday and is already testing its 20-day average. These are typical pullback levels, but there are other lower areas it could test as shown below. 2360 and 2340 look like potential targets if the 20-day EMA can't hold.

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ACWX (The I-fund tracking index) was down 1% and landed on some key support. You can see the updated I-fund and other TSP share prices and returns, usually posted daily by 8:30 PM ET here: https://www.tsptalk.com/tsp_share_prices.php

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BND (bonds / F-fund) pulled back modestly with yields ticking slightly higher. Nothing is broken, but similar to other charts above, we are seeing some cracks.

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Thanks so much for reading! We'll see you back here tomorrow.

Tom Crowley


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