TSP Talk Blog

I hope everyone enjoyed their Thanksgiving weekend. I sure did, but after 10 days on the road in four different hotel rooms and a laptop, I am sure glad to be back home with my normal setup. Let's get to it.

It has been quite a run for the stock market since the election and the rally ran right through the strong seasonal period of Thanksgiving week. The Dow picked up another 67-points with much of that coming just before the early close on Friday. All of the TSP stock funds gained about 0.4% on the day while bonds slipped yet again.

Daily TSP Funds Return More returns

This year has not been an equal opportunity event for all stocks as clearly the small caps have been the big winner and it's not very common to see the small caps up this much, +15.7% while the I-fund is actually down for the year. The 10.5% gain in the C-fund is good news for those who were concerned about the extremely weak start to 2016 - aka - as goes January, so goes the year. If you remember, the C, S, and I funds were down 5%, 9%, and 6% respectively in January, so these yearly totals are even more impressive than they appear considering their start.

The year is not over but the bulls would have to roll over pretty hard in December to give back these gains. We could see some profit taking in the coming days to weeks, but come mid-December, historical seasonality gives stocks a big edge again.


The SPY (S&P 500 / C-fund) blew through a couple of overhead resistance lines on Friday, but that was a very light trading day with virtually no traders (mostly investors) and that's why it tends to be a positive day. But now everyone, including the traders, should be back from their holiday ready to try to make money. The question is, which side is the money going to be made on? Momentum is clearly on the bulls' side, but seasonality suggests there could be some profit taking this week and into the first half of December.




The weekly chart of the S&P 500 also shows a minor breakout, but again, that was without much resistance from the bears. On the other hand, the inverted head and shoulders pattern is playing out nicely with a breakout above the neckline in July, a pullback to the neckline that for the most part held - except for those dog days before the election - and another leg up seems to be playing out. It's come a long way in a short time so the question is, how much do the bulls have left in them going forward in the short-term?




The DWCPF (small caps / S-fund) has been in a parabolic move higher for the last 3-weeks and did hit some long-term overhead resistance, but the resistance line is rising. That open gap does pose a problem for the bulls if there is a pullback.




The Dow Transportation Index has also been on fire. This longer-term chart shows how dramatic the last month has been as the Transports tick closer to its all-time highs, which unlike the other indices, was way back in 2014.




The EFA (I-fund) has been lagging and is still in negative territory for the year. It is still struggling below the 50 and 200-day EMA's and it again testing the overhead descending resistance line.




The reason for the under-performance in the international stocks has been the strong rally in the dollar since the election. Plus, the dollar was trending higher since June before the election. There's a large gap near 25.6 that may draw some attention in the near future.




The AGG (bonds / F-fund) just cannot catch a bid. No one seems interested in bonds with the Fed at a 100% chance of a rate high in December.




If you look at some of the bond market sentiment readings you can see that the 10-year Treasury has a negative 69, and that's means investors may prefer the flu over bonds right now. The positive thing with that reading is, if bonds actually bounce, there would be a lot of folks available to jump on a rally so we could see a sharp dead-cat bounce soon. I've said that a couple of times and nothing yet. Perhaps this is the selling of the rumor and traders will wait to buy the news after the rate cut?




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. 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

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

Tom Crowley


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