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Market Commentary

November 27, 2020
 
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 Today's Commentary         (Not seeing a current commentary?)


Stocks were mixed on Wednesday with the Dow and S&P 500 posting modest losses while the Nasdaq and the smalls caps were both up on the day.  The Dow ended the day down 174-points.  

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Trading volume was on the light side, and with today being just a half day of trading, it will also be a very light day of trading.  That usually benefits the bulls as traders (and the bears) tend to take the day off while investors continue to add to their 401K's and dollar cost average in with paycheck contributions. 

However, if there are any news events, the light volume can trigger a big move if the action gets pushed by just a few big money traders, so while the historical seasonality charts are on the bulls' side on the day after Thanksgiving Day, the bears could become a factor if given a good reason.  The question may be, are over-extended indices a good enough reason, because they are over extended.

As I mentioned on Wednesday, this is just a quick message today so we can all get back to our holiday weekend.


The S&P 500 (C-fund) broke out of what could be a bull flag on Tuesday, took a breather on Wednesday, and the question is whether the recent consolidation since the November 9th high will be enough to send the index higher after that giant rally, and that possible double top.  Good formation, but some poor indicators, especially in sentiment.

          


The DWCPF Index / S-fund continued to grind higher after 8 of the last 9 trading days were positive.  As the nosebleed rally gets extended, a test of the old resistance line, near 1750, would be a healthy consolidation at this point.

         


And being the hot fund, the S-fund has been the focus of many TSP'ers, although the gains in the I-fund this month have given the S-fund a little competition.  But this looks so unsustainable.  Not that there are any rules that says it can't go higher, but just when you think it can never go down, we can be reminded again what the bottom of a trading channel looks like.

         


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

For more info our other premium services, please go here... www.tsptalk.com/premiums.html

Thanks for reading. Enjoy your weekend and we'll see you on Monday!

Tom Crowley

 


11/25/20

Another giant day for stocks on Tuesday as the froth on top of this November rally gets thicker.  The melt-up continued as the Dow gained another 455-points, pushing the index above 30,000 for the first time ever.   Looking at the intraday charts it looks like no one hit the sell button all day.  Of course that's what sends stocks higher, but when it happens we see extremes in many indicators showing that things have gotten too hot, and any bad news would fill the vacuum being created on the downside.

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The Dow was up 3.6% in mid-February before the rug got pulled out from under it.  We came into this month with the Dow down 7.1% for the year, and here we are, after a double digit gain in November, and it is now back up 5.3% for the year.  That's quite a run to get us back to basically where we were some 8+ months ago.

Fundamentally, I don't think the economy or the market is back to the same conditions as it was back then, but the market looks forward and is anticipating more stimulus, on top of a 0% interest rate environment, and a Fed M1 balance sheet at an insane level, making for ideal conditions to be in stocks, even if it's mostly smoke and mirrors.  Easy money.

              


Even with that, it doesn't take much to trigger a run for the exits because most investors know things are getting frothy, but they will stay with the trend, until the trend ends.  So the question is, what will be the trigger that ends this trend?  The charts look OK now, although extended, and forget about the indicators.  They are already off the charts in most cases.

Admin Note:  The TSP is closed on Thursday for Thanksgiving and I won't be posting a commentary.  I will post some kind of update on Friday but it will be a quickie.  I will post the updated shares and returns, and some brief thoughts, especially if we have any big moves in stocks or news leading up to it.


The S&P 500 (C-fund) made its highest close ever on Tuesday although it didn't quite make it to the peak on November 9th, the day Pfizer announced their 95% efficacy in their vaccine trials.  On the following Monday, the 16th, we had the Moderna vaccine news and we got the highest close in the S&P to date - before yesterday.  Yesterday's rally seemed like chasing because the news wasn't spectacular, but the FOMO traders are jumping in, and they are usually the last one's to show up to the party.

         


The year to date chart shows a nice looking bull flag and all year they have done well, as you can see the other blue bull flags below.  There is some resistance just overhead so this one could have more pushback than the prior ones.

        


The 10-year chart shows that the S&P 500 is pushing almost every extreme possible, while exceeding others.  The market rarely makes it easy for traders to hit the sell button right at the top, so it wouldn't be that surprising to see a little more upside, just to frustrate the most people it can, but this is a little scary, and if you are anywhere near retirement, I think your nest egg in stocks could be getting vulnerable.

        


This chart shows the 50 and 200 day EMA and how far the S&P 500 is currently above them compared to other instances in the last couple of years.  It was even more stretched in February, but we know what happened then once we got some bad news.

     


The DWCPF (S-fund) is in the same boat - great action - nosebleed extended.

       


BND (F-fund) pulled back for a second day and it is now testing the old broken resistance line, looking for support.

         


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

For more info our other premium services, please go here... www.tsptalk.com/premiums.html

Thanks for reading. Have a Happy Thanksgiving!  I'll be here Friday with a brief update.

Tom Crowley


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Chart provided courtesy of www.sentimentrader.com
 
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