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Stocks up again, heading into tough seasonal period

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Stocks were up on Friday to end a strong week for the market. The indices took a bit of a different route on Friday as the large caps of the Dow and S&P rallied into the close while the Nasdaq peaked in early trading and faded toward the close. The Dow ended the day up 65-points and fears of a nuclear North Korea seem to be overshadowed by the possibility of future tax cuts.

Daily TSP Funds Return

I mentioned this on Friday and even though I normally say that seasonality is not a primary indicator, there are certain times of the year when it seems to play a bigger role than others, and the last half of September is one of those times if we look back at the last 30 years. On average it looks very weak, but it may not be that simple...


Chart provided courtesy of www.sentimentrader.com


That's because if we look at the last say 10 years, September had some huge swings - in both directions. Last year was rather benign, but take a look at the returns for September over the prior 10 years.



It actually had more positive returns than negative (6 to 4) but look at the size of the negative years. I've included the returns for August and October, which can also have some big moves.

The fact that the month has started out in positive territory may be a good sign, but again, the last half of the month is the one with the bad reputation.

Perhaps it will be similar to 2016 where August was slightly positive and September followed in kind. This past August ended down slightly. By contrast it seems like when August had a large absolute (+/-) return, September also had a large swing. So far the S&P is up about 1.6% for the month.

There is a Federal Reserve meeting this week on Tuesday and Wednesday.


The SPY (S&P 500 / C-fund) has been sliding higher in what we call an "F" flag (coined by Oscar Carboni.) The index could ride up that narrow flag for a long time, or not, but they do tend to eventually break to the downside. Should it break down eventually, there are two open gaps below that could act as a draw.




The weekly chart of the S&P 500 shows the long term rising trend continuing, and it goes back a year and a half, but it is closing in on the top of the channels, and the red rising wedge could pose some trouble since they tend to break down eventually. But that's a longer-term outlook and doesn't necessarily mean it will happen this week or this month.




The DWCPF (small caps / S-fund) is also showing a rising wedge and it is tested the upper end of the wedge now. Other than that, the trend is up and the bulls seem to be in control.




The Dow Transportation Index was up solidly on Friday but it has stalled over the last few trading days in the 9550 area.




The EAFE Index (I-fund) was up as well and once again the falling dollar had a lot to do with it.




That's significant because you wouldn't know it by looking at the largest holding in the I-fund, the London FTSE Index, which broke down last week.




The AGG (Bonds / F-fund) was pretty flat on Friday as it encountered some resistance at one of the old support lines, and the 20-day EMA.




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


Posted daily at www.tsptalk.com/comments.php

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