TSP Talk Blog

The melt-up in stocks continued on Thursday with modest gains in the Dow (+65) and S&P 500, while small caps once again outpaced their larger siblings. Except for a couple of 2 to 3 days dips, this market has been going straight up since Election Day. We know stocks won't go up forever, but the question is, how long will they go up?

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On the December seasonality chart we expected a little struggle early this month but since the December 1 pullback, it's been pretty much smooth sailing higher. The 11th through the 15th are the days that historically set up a buy the dip opportunity before the holidays, but is it possible that this will be a typical year after what we've just gone through?


Chart provided courtesy of www.sentimentrader.com


The SPY (S&P 500 / C-fund) was up another 0.24% yesterday and remains above all the short-term rising support. Clearly on the overbought side, but will those old resistance lines hold as support on a pullback? That rising wedge is not generally a bullish formation.




This 10-year chart shows a very long-term resistance line being tested now. I also noted a couple of very long consolidation periods (blue boxes) that look sort of similar. If the resemblance continues, we could see a pullback back to the top of the box before the next leg higher begins.




The small caps, in the form of the Russell 2000, is also testing the top of a very long term trading channel. Will that be enough to stop the incredible rally in small caps, or is it just getting warmed up?




The AGG (bonds / F-fund) is trying to put in some kind of low here but it hasn't exactly exploded yet. That 108 area looks key for now.




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Thanks for reading. Have a great weekend!

Tom Crowley


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