Holiday bullishness persists as the Dow gained another 122-points on Thursday. The broader indices weren't quite as strong as the S&P 500, and more so the small caps, saw smaller gains percentage-wise.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 300"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 179"]
[TR]
[TD="width: 83, align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0126%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] F-fund:[/TD]
[TD="align: right"] -0.02%[/TD]
[/TR]
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[TD="width: 83, align: right"] C-fund:[/TD]
[TD="align: right"] +0.47%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] S-fund:[/TD]
[TD="align: right"] +0.14%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] I-fund:[/TD]
[TD="align: right"] +0.40%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
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[/TD]
[/TR]
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There is a strong battle going on between some very positive seasonality and historical trends, versus extremes in many sentiment and oscillating-type indicators showing the indices well overbought.
The S&P 500 (SPY) made new highs again.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps are getting some resistance at the top of its rising trading channel as it ended the day flat on a day when the Dow gained 122-points.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
From sentimenTrader.com: "The S&P 500 has so far rallied more than 20% on the year and 3% in the past two weeks. Heading into a new year, January was positive 7 out of 9 times, averaging +2.2%. Its maximum loss at its worst point during January averaged only -0.8%, compared to a maximum gain at its best point that averaged +3.9%. This positive momentum is in direct conflict with many of the sentiment studies we've been discussing lately, very similar to December 2010."
The dumb money confidence in a rally is at a multi-year high at 75%. And why wouldn't it be? The dumb money are generally the followers and they are following the market up and making money along the way. Unfortunately they are usually the most bullish near market tops.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The smart money has only a 33% confidence in a continued rally. The 42% gap between the two is quite an extreme and normally a sign of concern for stocks.
The VIX is another one of those bearish looking indicators as it shows fear is down near multi-year lows meaning complacency is abundant.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Today (Friday) is day +2 on this seasonality chart surrounding Christmas Day.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The yield on the 10-year Treasury hit 3% yesterday before closing at 2.99%. The rise in yields meant bond prices were down. As I have talked about before Christmas, the upside pennant breakout on the TLT did turn out to be a fake-out, and that is now confirmed with a breakdown.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 7 to 10 year IEF continues to slide after the head & shoulders breakdown.
The longer-term chart of the TLT shows it testing some solid support, but that also looks like a head and shoulders pattern, and that is not good.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds charts look awful, but as I mentioned, bond sentiment is extremely bearish and they may be running out of sellers soon. Chances of a rally are growing, if you are brave. But I like the G-fund over the F-fund until we see some kind of attempt from bonds to stop breaking down.
In today's TSP Talk Plus Report we look at the put/call ratios, the sentiment survey results, and some ridiculously bullish stats for starting 2014. 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
Administrative Note: If you have any interest in joining the AutoTracker (if you are not already on it), or if you know someone interested, it is highly recommended that you or they do so before January 1 so that you get the full year of tracking. If you get in late your account is considered a "partial year" return. More Info.
Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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.
