TSP Talk Blog

12/17/11

Bullish seasonality starts

Stocks lost ground last week and it has been interesting to see how the days played out. We saw mostly good economic reports that sent stocks higher in the early trading, yet by the close investors were selling. As we'll discuss below, historical seasonality was bearish last week, but this week things start to change.



For the TSP, the C-fund lost 2.79% on the week, the S-fund was down 3.14%,the I-fund dropped 4.64%, while the F-fund (bonds) gained 0.63%, and the G-fund was up 0.03%.



For the month, the C-fund is down 2.10% in December, the S-fund has given up 2.69%, the I-fund has lost 4.98%, while the F-fund (bonds) is up 0.90%, and the G-fund has made 0.08%.

The chart of the S&P 500 shows that it is now trading below the 20, 50, and 200-day EMA's which is a big warning sign, although it is less than 1% below the 20 and 50 EMA, and about 2% below the 200.

The chart itself has some positive formations in the inverted head and shoulders pattern (in blue) where it looks like the right shoulder (RS) may be trying to bottom. Also, a possible bull flag (red) seems to have been created off of the sharp rally in late November.


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

Last week the market battled some historic mid-December weakness according to the seasonality chart. But as you can see, that all changes this week, and of course the week between Christmas and New Years is probably the most consistently positive week of the year historically.


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

Seasonality is rarely a primary indicator, but this time of year I put it it up there near the top of my indicators.

Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.

Tom Crowley
www.tsptalk.com
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