TSP Talk Blog

The Dow , S&P 500, and Nasdaq were up 1.14%, 0.38%, and 0.86% respectively yesterday, so it was a nice day for the stock market, right? After Monday's "incredible", and Wednesday's "amazing", I can only say that Thursday's market was extraordinary. The Dow was down 611-points at the lows before a final 90 minute rally that took it up to the +260 level for an intraday reversal of 871-points. I am running out of words to describe the action, and the week as a whole so far. The rally was so quick it seemed that small caps didn't have enough time to catch up. Maybe today.

Daily TSP Funds Return More returns

It was the first back to back daily gains for the S&P 500 in December, and here we are on the 28th, so it's been that bad, but it may be wanting to end with some make up action.

The VIX closed at 30 again so traders are expecting these swings to continue. It's certainly a test of our fortitude.

How the next 5 days play out should be interesting, and something I have tracked for years, the end of one year and start of the new. There are trends for sure, and I have looked for patterns, but the trends seem to change every few years, which is a trend itself.

In the spreadsheet data below, I've highlighted some particularly bad (red) stretches and good (greenish?).

From 2014 - 2016 the action surrounding the New Year was fairly poor, both before and after.

The last two years saw decent starts after weak finishes to the prior year.

The S&P 500 finished in positive territory in 14 of the last 15 years. We saw 5 decent years from 2003 - 2007 before the dreaded 2008 bear market took a lot of those gains away.

Those big gains made from 1997 - 1999 (actually it goes further as 1996 was up 22.85% and 1995 gained 37.41%) were cut with three consecutive losing years from 2000 - 2002.

So, will the losses in 2018 (assuming the S&P finishes negative) be enough to offset the huge gains from 2009 - 2017, or do we need to see another year or two of losses like in 2000 - 2002?




This action over the last month or so has been so harsh that I would guess that a test of the lows is almost a given. The question is whether we can take advantage of a big bear market snap-back rally. It's doable, but dangerous.

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The S&P 500 / C-fund rallied late to erase some big early losses on Thursday, and the strong close pushed it above that narrow descending channel. Depending on the timeframe of the chart we look at may determine where any relief rally, should this one continue, start to run into some trouble. On this daily chart I'm looking at the 50-day EMA and the old support line so somewhere between 2600 - 2650 would be a lofty goal.




This is a weekly chart of the S&P 500 for the years leading up to the 2008 bear market. You can see that the initial trend breakdown occurred in January of 2008, and then there was a rally back up to the old support line that failed, where the downside resumed.




The current weekly chart shows a breakdown just this month. A similar rally like the one in 2008 could confirm the 2600 area that we saw in the daily chart, as a possible relief rally target. That's another 110 points or so on the S&P, so if we happen to see that in the coming days, be careful.




The price of oil did not reverse like stocks did yesterday, and that could be a concern. It is a big story that it has fallen so precipitously off the October highs, but can it also produce a relief rally that might help the stock market?




The AGG (Bonds / F-fund) actually closed higher but don't forget that the bond market closes an hour before the stock market, so that huge 90 minute rally in stocks didn't have a chance to impact the bond market fully.




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Thanks for reading. Have a great weekend! We get to do this all over again next week.

Tom Crowley


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