Huge gains in September. Should you let it ride?
Stocks moved mostly sideways last week, with an encouraging breakout on Thursday morning that unfortunately,quickly failed. The economic data has been mixed with no big catalysts for the market, so the sideways action may be understandable.
The TSP funds were mixed on the week. The C-fund slipped 0.18%, the S-fund was up 1.10%, and the I-fund added 0.37%. Bonds (F-fund) were up 0.41% and the G-fund added 0.04%.
The final numbers for September are eye popping. The C-fund gained 8.92% for the month, the S-fund jumped 11.47%, and the I-fund was up 9.81%. Last week’s rally in bonds moved the F-fund into positive territory for September as it ended the month with a gain of 0.17%. The G-fund was also up 0.17%. All of the green in the stock funds helped the L-funds to decent gains as well.
I was very encouraged on Thursday morning, to see the S&P 500 break above the 1150 level. 1150 was the January high (not shown) and the index made several failed attempts to break out above it until Thursday. I had been looking for a breakout, so I was quite disappointed to see that the breakout failed and may have instead been a fake out.
When a chart creates a higher high over the previous day’s high, as it did on Thursday morning, but then moves below the prior day’s low, it produces what is called an “outside day”. That is, the high and low was outside of the range of the prior day’s high and low. Having closed in negative territory, this qualified as a negative outside day. We saw similar action at the June peak and these negative outside days have a tendency to precede market reversals. That resistance also happened to be at the top of the new ascending trading channel.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So the encouraging breakout may have turned into a market reversal. Only time will tell, but it was enough to send me back into defensive mode – at least in the short-term. If the S&P 500 can start trading back above 1150 again, I will start looking for another entry point into the stock funds.
The stock market gains in September made it the best September since 1939 (71 years) and while that sounds encouraging, it does not always mean that good times are going to continue.
Our technical indicators are telling us that we are in a bull market so we want to believe the outcomes will be bullish, but I wanted to show what happened after that big September rally in 1939. This is a monthly chart where every bar represents a month’s activity.
The high in September 1939 turned out to be the market peak that that year, and that level did not get broken again until 1945. So if you were able to capture some or all of this year’s September gains, congratulations! That is huge for your account. But it does not guarantee us that the market is out trouble just yet. It may actually be a time to sit back and hold onto some of those gains until the S&P 500 can prove it can get back over 1150 and the high made on Thursday.
Last month’s jobs report will be released this coming Friday, and with earnings season and the November elections coming up, the action could get interesting in October.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive
Stocks moved mostly sideways last week, with an encouraging breakout on Thursday morning that unfortunately,quickly failed. The economic data has been mixed with no big catalysts for the market, so the sideways action may be understandable.
The TSP funds were mixed on the week. The C-fund slipped 0.18%, the S-fund was up 1.10%, and the I-fund added 0.37%. Bonds (F-fund) were up 0.41% and the G-fund added 0.04%.
The final numbers for September are eye popping. The C-fund gained 8.92% for the month, the S-fund jumped 11.47%, and the I-fund was up 9.81%. Last week’s rally in bonds moved the F-fund into positive territory for September as it ended the month with a gain of 0.17%. The G-fund was also up 0.17%. All of the green in the stock funds helped the L-funds to decent gains as well.
I was very encouraged on Thursday morning, to see the S&P 500 break above the 1150 level. 1150 was the January high (not shown) and the index made several failed attempts to break out above it until Thursday. I had been looking for a breakout, so I was quite disappointed to see that the breakout failed and may have instead been a fake out.
When a chart creates a higher high over the previous day’s high, as it did on Thursday morning, but then moves below the prior day’s low, it produces what is called an “outside day”. That is, the high and low was outside of the range of the prior day’s high and low. Having closed in negative territory, this qualified as a negative outside day. We saw similar action at the June peak and these negative outside days have a tendency to precede market reversals. That resistance also happened to be at the top of the new ascending trading channel.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So the encouraging breakout may have turned into a market reversal. Only time will tell, but it was enough to send me back into defensive mode – at least in the short-term. If the S&P 500 can start trading back above 1150 again, I will start looking for another entry point into the stock funds.
The stock market gains in September made it the best September since 1939 (71 years) and while that sounds encouraging, it does not always mean that good times are going to continue.
Our technical indicators are telling us that we are in a bull market so we want to believe the outcomes will be bullish, but I wanted to show what happened after that big September rally in 1939. This is a monthly chart where every bar represents a month’s activity.
The high in September 1939 turned out to be the market peak that that year, and that level did not get broken again until 1945. So if you were able to capture some or all of this year’s September gains, congratulations! That is huge for your account. But it does not guarantee us that the market is out trouble just yet. It may actually be a time to sit back and hold onto some of those gains until the S&P 500 can prove it can get back over 1150 and the high made on Thursday.
Last month’s jobs report will be released this coming Friday, and with earnings season and the November elections coming up, the action could get interesting in October.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive
