Thanksgiving week was favorable for the bulls with respectable gains of 1.4% to 2.4% for the TSP stock indices, and even the F-fund (bonds) gained over 1%. The Dow gained 153-points in the short day of trading on Friday, while the other indices were mixed. The S&P 500 was flat, the Nasdaq lagged with a moderate loss, and the small caps and I-fund led the way with solid gains.
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Speaking of the I-fund, it also led the way with a 2.4% gain on the week and that is tacking onto what could be the best monthly return for any fund this year. With 3 trading days left in November, the I-fund is now up 12.5% for the month, and that has almost cut its 2022 loss in half.
One of the catalysts last week was the continued weakness in bond yields and the dollar. Both have been tumbling as the market starts to price in a Fed that may be looking to slow down on their interest rate tightening program. I haven't heard anything about them stopping, but the pace of increases may wane. At least that is the hope and reaction based on recent economic data. So far Jerome Powell has not said as much, although other Fed Governors have weighed in with a more dovish take.
The weekly chart of the S&P 500 shows that the recent rally has reached up to some formidable resistance, so the bear market rally may be tested this week. Clearly a move above 4100 would get some market technicians excited, but after a 15% move off the lows, we could see the bulls get fatigued at these resistance levels.
This week has some issues on the seasonality chart surrounding Thanksgiving. Again, this is an old chart (thru 2011) but it contains 62 years of data.
Chart provided courtesy of www.sentimentrader.com
December starts on Thursday of this week, and on the more current seasonality chart, which is up to date going back 30 years, we see that there is a bullish bias early in the month, followed by some mid-month weakness, and finally there is a big advantage for the bulls in the latter half of the month with the most positive action coming after the 20th. I noted that there is a big different between the early strength and late strength when it comes to percentage of times positive.
Chart provided courtesy of www.sentimentrader.com
There is perhaps a caveat this year, being a bear market. Tax selling becomes a larger issue during years when the indices are down since it is more advantageous for tax payers to sell losses and take the deduction on their 2022 tax return, as opposed to positive years where selling a gain after the New Year postpones paying those taxes by a year.
That said I looked back at 2008, the previous serious bear market, and we saw some decent gains in December that year. The C, S, and I funds were up 1.1%, 4.68%, and 7.7% respectively that month. However those funds were down dramatically in September, October, and November in 2008, and this year October and November did quite well, so the comparison isn't a good one.
So the tax selling theory doesn't seem as viable but perhaps we haven't seen the tax selling yet where as in 2008 the selling was extreme prior to December.
We will get the November jobs report on Friday and the estimates are looking for a gain of about 200,000 jobs, which would be about 15% lower than the October numbers, and the Fed has been looking to slow down the jobs market. The unemployment rate is expected to remain at 3.7% but I do see a few 3.8% predictions, which could help to get the Fed leaning on the dovish side if is that high.
Like the weekly chart of the S&P 500 (C-fund) that I posted up top, the daily chart is also closing in on some serious resistance as it approaches the 200-day simple average, which gave it some trouble back in August. It is also sitting on the 200-day EMA. There is an open gap up near 4070 that could look to get filled before the bears make any moves. The recent cup formation over the last two weeks actually looks pretty good in that it formed a base and consolidating recent gains, but it was a holiday week and pre-holiday action is often reversed after the holiday. There is also an open gap down near 3810 and the question is if this bear market rally can continue to ignore that gap, even if the October lows turn out to be a bottom?
The DWCPF (small caps / S-fund) had been lagging and you can see that it is well below any overhead resistance, so the question here is if this relative weakness is a sign of trouble, or a sign that the S-fund may have more room to run if the S&P 500 runs into resistance as it appears.
The EFA (I-fund) has been on fire and I have totally missed this. The rapid decline in the dollar has been a key catalyst but theoretically if the Fed continues to raise interest rates, even if at a slower pace, I would think the dollar could firm up and rebound. I suppose it could just take a few dovish words from Jerome Powell to change that outlook, and December will be a busy month for the Fed. The chart is at a double top now so perhaps a little pullback is due.
BND (bonds / F-fund) was flat on Friday although the F-fund did get a modest gain from the TSP. There are a couple of open gaps below that should get some attention, but the chart has jumped over some key resistance during the short holiday week.
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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Speaking of the I-fund, it also led the way with a 2.4% gain on the week and that is tacking onto what could be the best monthly return for any fund this year. With 3 trading days left in November, the I-fund is now up 12.5% for the month, and that has almost cut its 2022 loss in half.
One of the catalysts last week was the continued weakness in bond yields and the dollar. Both have been tumbling as the market starts to price in a Fed that may be looking to slow down on their interest rate tightening program. I haven't heard anything about them stopping, but the pace of increases may wane. At least that is the hope and reaction based on recent economic data. So far Jerome Powell has not said as much, although other Fed Governors have weighed in with a more dovish take.
The weekly chart of the S&P 500 shows that the recent rally has reached up to some formidable resistance, so the bear market rally may be tested this week. Clearly a move above 4100 would get some market technicians excited, but after a 15% move off the lows, we could see the bulls get fatigued at these resistance levels.
This week has some issues on the seasonality chart surrounding Thanksgiving. Again, this is an old chart (thru 2011) but it contains 62 years of data.
Chart provided courtesy of www.sentimentrader.com
December starts on Thursday of this week, and on the more current seasonality chart, which is up to date going back 30 years, we see that there is a bullish bias early in the month, followed by some mid-month weakness, and finally there is a big advantage for the bulls in the latter half of the month with the most positive action coming after the 20th. I noted that there is a big different between the early strength and late strength when it comes to percentage of times positive.
Chart provided courtesy of www.sentimentrader.com
There is perhaps a caveat this year, being a bear market. Tax selling becomes a larger issue during years when the indices are down since it is more advantageous for tax payers to sell losses and take the deduction on their 2022 tax return, as opposed to positive years where selling a gain after the New Year postpones paying those taxes by a year.
That said I looked back at 2008, the previous serious bear market, and we saw some decent gains in December that year. The C, S, and I funds were up 1.1%, 4.68%, and 7.7% respectively that month. However those funds were down dramatically in September, October, and November in 2008, and this year October and November did quite well, so the comparison isn't a good one.
So the tax selling theory doesn't seem as viable but perhaps we haven't seen the tax selling yet where as in 2008 the selling was extreme prior to December.
We will get the November jobs report on Friday and the estimates are looking for a gain of about 200,000 jobs, which would be about 15% lower than the October numbers, and the Fed has been looking to slow down the jobs market. The unemployment rate is expected to remain at 3.7% but I do see a few 3.8% predictions, which could help to get the Fed leaning on the dovish side if is that high.
Like the weekly chart of the S&P 500 (C-fund) that I posted up top, the daily chart is also closing in on some serious resistance as it approaches the 200-day simple average, which gave it some trouble back in August. It is also sitting on the 200-day EMA. There is an open gap up near 4070 that could look to get filled before the bears make any moves. The recent cup formation over the last two weeks actually looks pretty good in that it formed a base and consolidating recent gains, but it was a holiday week and pre-holiday action is often reversed after the holiday. There is also an open gap down near 3810 and the question is if this bear market rally can continue to ignore that gap, even if the October lows turn out to be a bottom?
The DWCPF (small caps / S-fund) had been lagging and you can see that it is well below any overhead resistance, so the question here is if this relative weakness is a sign of trouble, or a sign that the S-fund may have more room to run if the S&P 500 runs into resistance as it appears.
The EFA (I-fund) has been on fire and I have totally missed this. The rapid decline in the dollar has been a key catalyst but theoretically if the Fed continues to raise interest rates, even if at a slower pace, I would think the dollar could firm up and rebound. I suppose it could just take a few dovish words from Jerome Powell to change that outlook, and December will be a busy month for the Fed. The chart is at a double top now so perhaps a little pullback is due.
BND (bonds / F-fund) was flat on Friday although the F-fund did get a modest gain from the TSP. There are a couple of open gaps below that should get some attention, but the chart has jumped over some key resistance during the short holiday week.
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.
