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Coolhand's Market Analysis

December is Here

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According to the Stock Trader's Almanac, December is the month in which the S&P 500 (C fund) has performed the best (going back more than 60 years). It is also the month when the January effect begins. The January effect is a seasonal anomaly in the financial market where where the price of stocks increase in the month of January more than any other month. However, the January effect now seems to be begin around mid-December.

So seasonality is now in the bulls' favor.

Sentiment wise, we are quite bulled again at 62% bulls. I have to think we'll get some degree of weakness this week on that reading. Our sentiment has seen some high bull readings the past few weeks and the market has mostly pushed higher on those weeks or ended mixed. That's how market character has been in the short term. But we usually got some weakness during those weeks, even if the market advanced. I am concerned however, that some of the other surveys are also showing higher levels of bullishness. After all, they know seasonality is in their favor too.

Here's some charts:

Interesting Fact-2013-top-50-trend-jpg

For the new trading week, total stock allocations rose 1% to 97.88% for the Top 50.

Interesting Fact-2013-total-tracker-trend-jpg

Stock allocations rose a bit more across the auto-tracker from the previous week, from a total stock allocation of 51.06% to 52.59%. We remain cautious even when we are very bullish. That's not a bad thing. Just an observation. I am happy to see that risk management is alive and well on the auto-tracker.

Interesting Fact-spx-png

The S&P 500 continued to melt up this past week, hitting fresh all-time highs in the process. RSI and MACD remain positive, but flat. And the chart in general remains bullish. While not depicted on this chart, I checked to see where price was relative to the 50 day moving average. Because if price gets anywhere near 6% above the 50 dma, I’d get more concerned. But currently it is well away from that level. Still, it’s extended since the low in October and due for some downside pressure. But this is a tough time of year (seasonality) to be looking for much.

Still, the sentiment set-up is there for some downside. But the other problem besides seasonality for the bears is underlying market support. It's has been strong. That can change quickly, but it can linger for some time too. This would be a good spot for the powers that be to catch a lot of bulls off guard too. Take it down hard so they can reload while shaking loose a lot of bulls and then launch it again. We'll see. If it comes, I'm ready to buy.

To see this week's full analysis, follow this link TSP Talk Members' Home Page

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Comments

  1. MrJohnRoss's Avatar
    " Take it down hard so they can reload while shaking loose a lot of bulls and then launch it again. We'll see. If it comes, I'm ready to buy."

    Good philosophy.
  2. coolhand's Avatar
    Quote Originally Posted by MrJohnRoss
    " Take it down hard so they can reload while shaking loose a lot of bulls and then launch it again. We'll see. If it comes, I'm ready to buy."

    Good philosophy.
    I just wish the entry points were easier to pinpoint. Still not a lot of damage done today and that keeps me a bit cautious.
  3. ravensfan's Avatar
    Quote Originally Posted by coolhand
    I just wish the entry points were easier to pinpoint. Still not a lot of damage done today and that keeps me a bit cautious.
    CH

    Ever consider adding Bollinger Bands to your charts? They're a great indicator for identifying entry and exit points.
  4. coolhand's Avatar
    Quote Originally Posted by ravensfan
    CH

    Ever consider adding Bollinger Bands to your charts? They're a great indicator for identifying entry and exit points.
    I actually use bollys in some of my charts that I don't post. But like all indicators, they don't always give you the best entry and exit points. They are a good tool, like Fibs though. The problem as I see it is liquidity. It's distorting the market. Another problem is our lack of flexibility as the market has tended to turn quickly off short and intermediate term bottoms. And I've noticed that over the past couple of weeks, weakness has tended to be more pronounced in the afternoons, which is after our IFT deadlines. The end result of market character, such as it's been, is I've kept a more balanced approach by maintaining an allocation of both stocks and cash (G fund). For me, the all in or or out approach has not been an effective way to manage TSP this year. At least not for most of us.

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