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Post election blast off

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Stocks soared off the results of the midterm elections, and while most expected some kind of reaction, not many expected anything of the magnitude we saw. The Dow gained 545-points on the day, and it gapped up above that key 200-day EMA resistance that we have been watching. The gains were broad across most major indices and it seemed to catch many by surprise, including myself.

Daily TSP Funds Return
The reaction to the midterm elections was probably a lot more bullish than most could have expected but as we had said a couple of weeks ago when things were a lot worse, that snap back rallies can be explosive, and it puts investors back in a comfortable zone, but is that the correct state of mind for this market?

I posted these charts on Monday and yesterday's rally plays right into the game plan of the 2007 top. First is the 2007 chart and on Monday we had just hit that letter "D" area off the lows just below the 50-week average. We thought if it played out then we could see a rally up to the "E" area that would become a lower high.




And here is what we have now. I'm sure it won't be perfect even if it does rhyme a little, but if we rally for another few days or into next week, watch that 2850 area which would mirror the letter "E" peak above.




The battle now will be between the FOMO people (fear of missing out) and the sellers of rallies. On October 29 I said that explosive rallies off the lows are not easy to sell because of a new bullish mind set, but it was probably the wise move. I said, "When you see a rally of 10-15% off the lows, your mindset isn't thinking "sell this." But being below the key moving averages, as they were in this chart, it can mean that is exactly what you need to do."

So, here's the rally rally. Are we thinking "sell this?"

Obviously I have not learned from the 2016 election where I was on the sidelines "just in case" something unusual happened. Well, we all know stocks soared after that and it was tough to get a good opportunity to get in without chasing. 14 months later we got the first real correction in that rally. Is this the same situation or is this a short-term emotional pop with people trying to relive the 2016 rally?

There is a 2-day Fed meeting wrapping up today with a policy decision that is not expected to include an interest rate hike. It's the December meeting when most expect the next hike to be announced. But they could say something that could stimulate the market, and with a lot of gains to protect, you never know if we could see some quick profit taking.



The S&P 500 / C-fund popped above the 200-day EMA with a gap up open, and the rally was relentless all day with the S&P making it all the way through the 50-day EMA before the day was done. We now have two open gaps below and a narrow rising channel. How long can it last? That's the question. Just a couple of weeks ago we were talking about selling rallies, and then you get a week like the one we just had and it doesn't feel like a good move. But is it?




The DWCPF (S-fund) rallied 1.7% yesterday but this one remains below its 50 and 200-day EMAs. It has been a great move off the lows, but as we keep saying, bear market rallies can be explosive. We'll have to see if this has enough left in the gas tank to get back above those resistance levels.




The EFA (EAFE Index / I-fund) is back up to the bottom of the trading channel it fell out of in October. This one has been in a bear market for quite some time so it is make or break time for the I-fund.




The yield on the 10-Year Treasury Note is at levels we haven't hit since 2011. The double bottom in this monthly chart shows a major change in character in the bond market.




Of course bond prices move counter to yields so the AGG (bonds / F-fund) is breaking down from a bear flag, although its short-term double bottom has been trying to hold as support.




The High Yield Corporate Bond Fund came along for the ride yesterday, which is always a plus for stocks.




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

Tom Crowley



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

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Comments

  1. isleepwell's Avatar
    Your Post Election Blast Off recap seems spot on yet investors in the TSP do not benefit from the current vehicles offered to place capital. Sure, we get a 5% match, can invest a healthy chunk of money for the retirement years, but do we get the appreciation available with other funds. With approximately 600 billion dollars placed within the TSP I think the TSP advisory board could do a better service to investors by offering a wider choice/selection upon which participants could find returns.

    Having Blackrock, which manages in excess of 6 TRILLION dollars on our side makes a difference. Why can't the TSP advisory board enlist Blackrock to come up with other investment possibilities for participants to choose among? Even if Blackrock charged a higher fee for those possibilities, would it not be worth entertaining the notion if higher returns could get achieved? It boils down to risk management I suppose. I am to date disappointed with the caretaker, also ran mentality of the TSP advisory board overall. Never in all the years of investing with the TSP have I ever been offered to fill out an investor satisfaction survey. And, I believe the leadership of the Advisory Board does a disservice to patrons for offering such inadequate investment opportunities.

    I am not looking to take on a pile of risk, and don't want participants to lose money ever. Yet, at the same time, if I, and/or any other participants had a wider variety to place the investment then we may in fact achieve better results.

    Bottom line: The TSP Advisory Board seems asleep as of this date, 11/11/18, and oblivious to the desires of participants who wish for better choices to place 401k dollars.

    ...isleepwell...
  2. tsptalk's Avatar
    We agree. More investment choices and a couple of more transfers allowed each month would be wonderful, but they (the TSP advisory board) don't care too much about what we want.
  3. isleepwell's Avatar
    Furthermore, on June 25, 2018 the Chairman of the TSP Advisory,"Chairman Kennedy highlighted the importance of ensuring

    that all employees, regardless of level, have the opportunity to

    come forward with suggestions and ideas and feel like they are part of the team."

    Truthfully, I don't feel like I'm a member of any team here. According to what I read, six members sit on the advisory board controlling the fate of where approximately $600 billion dollars can get invested. Ages ago, when I first invested in the TSP, I remember reading a pitch by the TSP then which stated, "It will not be uncommon for participants to retire with several million dollars in their TSP account."

    That may just have been a sales pitch at the time, but I liked the sound of it. The investment landscape of the day has changed. Can you travel around the world on a bicycle? I don't believe so. And, I do not believe investors here can obtain outstanding returns via the current investment mechanisms available within the TSP as they currently exist.

    A well known retired senator spoke on one of the business channels the other day on perhaps 11/8/18. He spoke about how no politician wishes to touch the sacred retirement cows such as social security. He stated, that by the year 2034, for every $1,000 dollars promised to the social security participant in benefits, the social security fund would only be able to pay out $770 if a remedy does not appear within the Congress.

    Only two ways exist to balance a budget in my minds' eye. They are: 1) Increase revenues. 2) Decrease expenses.
    Congress could increase the social security tax, cut benefits, raise retirement ages, or do a combination of the above.
    The Congress has a lot more people, and interests to deal with on the Social Security issue. Therefore, a lot more convincing, and many more fingers in the final outcome pie.

    With six members sitting on the TSP Advisory Board, we appear in better shape. If we only need to convince six people to upgrade investment vehicles so participants can overcome the Social Security shortfall which will occur by 2034 if left unchecked, then we still can get something positive accomplished in this arena.

    Mr. Kennedy, distinguished members of the Advisory Board, fellow Americans, please do the right thing, and move forward with the concept of giving participants better choices in the struggle toward their future investment survival.

    ...isleepwell...

SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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AGG (F Fund) (delayed)

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