TSP Talk - The bulls are back

Large cap tech stocks were ready after the Thanksgiving weekend, but the Dow and small caps still had some tryptophan in their system... until yesterday. The Dow gained 309-points and the S-fund added 1.2% on the day so the bulls gave the bears an opportunity early in the week, but they didn't make their move. Perhaps the jobs report on Friday will change things, but for now, the bulls are back in charge

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There's no arguing that stocks have some issues. The S&P 500 is trading at 25 times their 2025 earnings projections. That's way beyond average. But one thing that I have learned is that it is difficult, if not impossible, to time the market using valuation. Stocks often go higher than than seems reasonable, and in bear markets, lower.

Yes, this market will correct and give us some pain at some point, but momentum and charts are much better indications of when a rally or bull market is coming toward an end. Right now we don't see that so picking a top sounds smart when you get it right, but until something changes, we're not at that point yet.

That doesn't mean it isn't prudent take lock in some gains. I've done that a few times this year when we saw some signs of trouble, but I have tried to keep at least some of my money in stocks this year just in case my analysis is wrong, and the bull market continues to be right.

When the next bear market shows its ugly head again, we'll know it. The charts and indicators will tell us, and hopefully with good warning. That's when I will be more defensive and moving 100% to the sidelines (G or F funds) at times will make perfect sense. I am expecting some kind of mid-December swoon in stocks, but whether it will be worth trading, I don't know, but probably not a top until after the New Year.

I know this can be the kiss of death - bragging, gloating or even talking about returns, but here goes. This year my TSP Talk Plus System return is +32%. Sounds great. But the C-fund and S-funds are up 29% and 27% respectively, so I really haven't done much better than the buy and holder. However, in 2022 the C-fund and S-funds lost 18% and 26% respectively, while I was able to make 1%. I would have been better off in the G-fund that entire year, which was up 3% in 2022, but you see my point.

Market timing isn't about just making the most gains you can when in a bull market, it's holding onto as much of that as you can during bear markets.

By the way, it can backfire on you as I have had some years where I underperformed the market by quite a bit. Some say it's risky doing what I do, but my philosophy is that buy and hold is even more risky because by definition you have no chance to avoid big losses during bear markets. With timing, I feel like I have some control, whether it is working for me or not. Others will argue this, and that's fine. To each their own.

Anyway, we're in one of those bull markets and history suggests December should be a positive month if stocks are doing well for the year coming into the month, but at some point things will change. Let's hope we see it coming.

One thing I said after the election was that I didn't expect the big post-Election Day open gap to get filled anytime soon. I may have even said "this year." It's been open for a month now and we still have 4 more weeks before we know if it stayed open until the end of the year. It will get filled, and it may not be until next year, but the "anytime soon" window is closing.

You can see that open gap on the S&P 500 (C-fund) chart down below 5800. The chart is currently at all-time highs and trending higher. It will peak eventually, and while I see no evidence to bet on a peak right now, if you've made a lot of money during this rally, locking some of those gains at this point, wouldn't be the worst thing you could do. As this gets above 6100, resistance comes into the picture and that could change things.

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As I have said before, keep an eye on bitcoin, which is again flirting with 100,000. This is a good indication of investors' appetite for risk. If they're pushing this to new highs, they'll probably keep buying stocks as well.

We get the November jobs report on Friday. Estimates are expecting a gain of 200,000 to 220,000 jobs and an unemployment rate of 4.2%, which is a tick higher than last month.




DWCPF (small caps / S-fund) is showing signs of wanting to break out of the sideways consolidation, but it hasn't done so yet, even though it just made a new closing high yesterday. The high on November 25 is the top so far and it has to get past that on a closing basis to officially break out. It could happen today or we may have to see what the jobs report brings tomorrow before there's any commitment to buy or sell near these all-time high levels.

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ACWX was up 0.15% yesterday and the I-fund is trying to make this an official move to the upside as it continues to trade above resistance. It's possible that this rally could fail once that open gap near 55.50 gets filled, so I am reluctant to buy it until I see how that is resolved.

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You can see the updated I-fund and other TSP share prices and returns posted by about 8:30 PM ET daily here: https://www.tsptalk.com/tsp_share_prices.php


BND (bonds / F-fund) is sure flip flopping in recent days but it is trading in a range after a sharp spike higher at the end of November. Again, the jobs report may set the tone for the direction of the next move, but right now that looks like a possible bull flag forming on the F-fund.

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

Tom Crowley


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