TSP Talk Blog

Stocks were down yesterday with small caps taking the brunt of the selling again, although volume was light and it's tough to conclude too much from the action. The Dow ended the day with a modest loss of 68-points, with a similar percentage loss for the S&P 500. The Nasdaq took a stiffer hit and small caps saw a second 1% plus loss in as many days. Bonds were up slightly.

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This is a tough time of year to do any analysis outside of seasonal tendencies, and right now some of those tendencies are working, and some aren't. Historically it is one of the best weeks of the year for stocks, so that's not exactly on track, but the one week up, one week down surrounding Christmas seems to be doing its thing.

Because of that I'll make this quick because I don't have a lot to say about it. I take that back. I have a lot to say, but it probably is meaningless in this holiday environment.

As for next week, that could be interesting, and whether any weakness this week is setting the tone for more weakness to start the New Year, or if this could be the pre-holiday reversal that will be reversed back after the holiday - you never know. The bond market isn't really showing any signs of trouble yet.

Historically the first two trading days of the New Year are still considered part of the Santa Claus rally, but so far that hasn't been panning out this week, so who knows?

There's a lot on the table next week with the stimulus still being negotiated, the Georgia run off elections on the 5th and, on January 6 the new congress and Mike Pence will count Electoral College votes and officially declare the winner of the 2020 presidential election. Not coincidentally, there is a big political rally scheduled in D.C. on that same day. Market mover? I don't know. I have not been on my game so I'm tempted to just throw a dart at the funds to see which one I hit at this point.

I still believe the market is in serious need of a correction, or worse, but tops are tough to call when momentum has been this strong. As we saw in early 2020, nobody rang a bell at the top. Everything just started to collapse quite quickly from lofty levels back then, so when we get two big sell offs in small caps in a row, we either have a buying opportunity, or the proverbial bell may have been rung.

Administrative Note: We're planning another annual subscription sale for our premium services starting in January. As always, even if you have an existing annual subscription, you will be able to add another year at a 25% discount, and monthly subscriptions can convert to annual to get this discount. I'll send an email reminder at the end of the week.

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The S&P 500 (C-fund) rallied early, hit the top of its trading channel and started to slide. That's a negative outside reversal day, and there is a small gap below from Monday's open that could look to get filled if the downside momentum moves into Wednesday. The volume has been light so there's no signs of urgency to sell here yet from the big money.




The DWCPF (small caps / S-fund) posted its second big down day in a row, during the historically best week of the year, and the best performing fund in 2020. One worrisome level of support was broken and that 1925 area may be support that really needs to hold or the correction could be underway.




EFA / I-fund had a good day moving to new highs, with the help of another down day for the dollar. This chart is still riddled with open gaps below so it's very tough to just buy and hold this one.




BND (Bonds / F-fund) is still in the top of that consolidation area, and back against the descending resistance line all the way back to September. If the bond bears are around this week, they could be making a stand in the area. Otherwise a breakout above resistance would be bullish for bonds obviously, but also a possible warning to the stock market.




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

Tom Crowley



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