Inching higher
                         
Stocks continued to move higher yesterday, although the indices lost steam in the final hour of trading and closed at the day's lows.  The Dow gained 9-points during the low volume trading.

                                  

For the TSP, the C-fund added 0.12%, the S-fund was up 0.34%, the I-fund gained 0.42%, and the F-fund (bonds) jumped 0.68%.

After a few phone calls and emails, we finally got the skinny on the Friday, December 31 situation with the TSP.  According to tsp.gov:  

The Thrift Savings Plan will be closed on Friday, December 31 in observance of New Year's Day.  The stock and bond markets will be open, and the TSP will process transactions. However, since December 31 is a Federal Holiday, the TSP call centers will be closed.

So you can make interfund transfers on Friday morning.  That's important because the first trading day in January has a tendency to be a big day, whether up or down, and this gives you an extra day to decide how you want to be invested on the first day of the new year.  In 4 of the last 5 years, the S&P 500 made a move of 1.4% or more on the first trading day of the New Year.

You can see that there has been some weakness on the first trading day of a new year, but the second day has been quite positive historically.


                                 Chart provided courtesy of www.sentimentrader.com

The S&P 500 made another new high yesterday but it will be testing the lower end of the recent - very tight - rising trading channel today.  The trend remains up, but how long can this trading channel hold?  I suspect over the next week this tight channel will break, but which way?  All of the indicators say down, but momentum and seasonality still say up. 

                        
                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

I did raise a little cash (30% G-fund) with an IFT yesterday, and may add more to the G-fund should we rally again today and / or Friday.  If we do happen to move down sharply on Monday, January 3, we'll have our new Interfund Transfers at our disposal.

Strong seasonality and positive momentum are up against overly bullish sentiment and stretched market indices.  This is the New Year's Day holiday historical seasonality chart.
                               
                                Chart provided courtesy of www.sentimentrader.com

Here is a chart I have been keeping of the final 2 trading days of the year, plus the first 3 of the new year.  As you can see, over the last 14 years we have had some big positive gains during that 5-day period, and some big negative declines as well, so the volatility is certainly present, but overall the odds do favor the bulls as 9 of the last 14 five day periods, ended with gains.

SentimenTrader.com took it further, as they normally do, and broke down the data based on only the trading days between Christmas and New Year's during a strong market year, and a recent rally into Christmas...

[The follow chart] shows how the S&P 500 fared from Christmas through year-end when it had been up at least 10% over the past year and at least 3% over the past month.

                             
                              Chart provided courtesy of www.sentimentrader.com

Only 1 negative week out of 12 since 1951 under similar circumstances, and the gains were only modest; just like what we have been seeing over the last week or so. 

Thanks for reading!  We'll see you tomorrow.

Tom Crowley