TSP Talk Blog

It was more typical light volume, positive biased, holiday action yesterday, although stocks peaked early in the day and drifted lower throughout the afternoon to close well off the highs. Still the Dow held onto an 11-point gain while small caps and the Nasdaq led the way again with solid gains.

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The Consumer Confidence report came in at 113.7, up from 109.4 in November and above the expected 109.8. It was the highest reading in this economic indicator since August of 2001. That can be a rear-view mirror indicator, and like the Michigan Consumer Sentiment indicator a couple of weeks ago, tends to be the highest after big market rallies, rather than creating new or continued market rallies.


Source: www.bloomberg.com


In 2007 it got close to the current level, and we know we were just getting into the early stages of the financial crisis about then and stocks suffered greatly. In August 2001, the last time it was this high, you can see stocks (below) and Confidence (above) both went south afterward.



So this sounds like a good thing for the market, but not necessarily.


The SPY (S&P 500 / C-fund) broke to the upside of the flag formation in morning trading as we might expect from a bullish flag, but the weak close put it back within the flag creating a potential fake-out. This is a strong seasonal holiday week where technical analysis is not always useful so we'll just have to see if money managers are buying to pad their books with strong stocks, or if they are selling to take profits.




The DWCPF (S-fund) did the same with a mini-breakout that failed by the close, but it still produced a sold 0.37% gain on the day.




The EFA (I-fund) remains in its more bearish looking flag. It's not the best looking chart but it is holding.




The AGG (bonds / F-fund) was down slightly but closed off its lows. The bearish flag broke down after testing the 20-day EMA on Friday. Again, not the best looking chart after its little dead-cat bounce over the last week. It needs to get closer to 108 to improve technically and it is still probably due for a blindsided rally since so many folks are bearish on bonds.




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

Tom Crowley


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