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20,000 came up just short again

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The media obsession with Dow 20,000 hit a frenzy on Friday as we came with 0.37 of hitting the milestone before peaking a dipping back some into the close. The large indices still ended the day with solid gains, the Dow added 65-points, while small caps were flat, and the I-fund was down because of a rally in the dollar.

Daily TSP Funds Return

The day started out with the Jobs Report which showed 156,000 jobs being added in December, about 20,000 less than expected, and an unemployment rate of 4.7%, which was expected and 0.01 higher than last month.

As we head toward the inauguration of a Trump, let's look back at what happened during the prior two 1st-term inaugurations of Bush and Obama.

The start of January 2001 was choppy but basically flat by the time inauguration day came. Stocks then bounced for a couple of weeks before the market posted a sharp 16% pullback.

In 2009 stocks were falling after a late 2008 rally. The inauguration of Obama was followed by a small rally but then stocks proceeded to plummet about 21% until eventually bottoming in March. That low in March turned out to be the low of the 2007-2009 bear market.

Not a lot of data to base any major decisions on, but two sharp declines followed within a week or two of the prior two inaugurations of a new president.

The SPY (S&P 500 / C-fund) broke above its bull flag on Friday and made a new closing high. This is a bullish chart formation but the fact that there was selling into the close may indicate some reservations from investors to hold at this level.

The weekly chart of the S&P 500 shows the new closing high but again it is closer to the top of its rising channel and the path of least resistance may be down. There is some support at the rising dashed red line that held during post-Christmas week.

The DWCPF (S-fund) backed off slightly on Friday lagging the large cap indices. This bull flag broke last Wednesday but so far no follow-through. Perhaps it is just taking a break but we'd want to see small caps participating on days when the major indices are rallying.

The Dow Transportation Index remains in a downtrend despite the 0.58% gain on Friday. It seems to be flattening out from its descending trend but so far no breakout from the downtrend. This is another piece of a possible crack in the market internals.

The EFA (I-fund) was down on Friday, mainly because a big bounce back from the dollar. The sharp rally recently in the I-fund was assisted by weakness in the dollar so the dollar can giveth and taketh away.

The AGG (bonds / F-fund) pulled back from its relief rally on Friday. It remains in a rising channel but this is still a bear market for bonds and I would think the relief rally may be running into some resistance here although I wouldn't get too bearish until that rising channel breaks down.

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

Tom Crowley

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S&P 500 (C Fund)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)