TSP Talk Blog

As this crazy year winds down, we got a quiet day of trading on Wednesday, as we'd expect this time of year. The seasonal bias and internal numbers were bullish, and volume was light as we'd expect, but there was a fade off the highs so the bears were still hanging around. The Dow gained 74-points and the small caps broke their 3 day losing stream with a strong day. One more trading day to go in 2020, and it should be quiet, but if any big money makes a move, it could push the indices around.

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The action yesterday wasn't very telling because of seasonality and light trading volume. We know that the end of a month and beginning of anew month have a positive tendency. The same with the end of an old, and beginning of a new year. But after a day or two into January, the market tends to pick a direction. As the old saying goes, as goes January, so goes the year, so watching how the market reacts after Monday or Tuesday of next week may be determinate of how the year goes. That's a little over simplified, but a generally known tendency.

As we look at the charts, the explosion off the March lows has been almost unprecedented, particularly in the small caps. This long term chart of the S-fund shows not only how parabolic this rally off the March lows has been, but even over the long-term, there is all kinds of resistance overhead at the recent highs, albeit rising resistance. That will make the initial move in 2021 very interesting because that first week in January generally sets the tone for the year, and it certainly looks as if some backing and filling is due here.




That's the simple analysis that looks so obvious, but we know the market rarely makes things easy for us. The surprise move would be another leg higher from here, and as doubtful as that sounds, the market does like to get a lot of people leaning the wrong way. I think a rally in January would probably have to be sold, but the question is, do we get more upside before a pullback? Again, if it looks obvious, it's probably wrong.
I want to thank all of you who read our daily commentaries, particular our premium members who have been so loyal to our services. I really appreciate it. 2020 was rough year for my account personally as the buy low, sell high philosophy was not a winning strategy unless you were extremely patient like some of our AutoTracker members who made one or two very well timed moves near the market highs and lows of the year. I was trying to buying low in March after the first 10% decline, but the market kept going lower. Then I was selling the first 10% rally off the lows, and it kept going higher, so I was doing a lot of zigging while the market was zagging, and zagging when the market was zigging. Let's move onto 2021.

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 to premium members and anyone on our email alerts reminder list once the sale prices are in place.

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The S&P 500 (C-fund) was up slightly but the action was quiet and not very enthusiastic. It's still near the top of its short term rising channel with an open gap from Monday just below. It seems obvious that a move toward the lower and of the channel and a gap fill is an easy call, but as we said above, staring a New Year can be anything but obvious.




The DWCPF (small caps / S-fund) fell below support earlier this week and got a nice one day pop back up. The break down is a warning sign, but it is still above all of its moving averages, and again the obvious may not be that easy to call for next week.




The Transportation Index has been consolidating sideways for a few weeks now and finding support near 12,400. At first view this looks like a possible bullish flag-like formation. But there's also a hint of a possible bearish head and shoulders top forming.




EFA / I-fund moved back into its trading channel after last week's breakdown. The dollar trending lower has kept this one very buoyant, and I would guess that if the dollar continues trending lower that the I-fund will be a good option again in 2021. But if the dollar bottoms and starts to rally for some reason (and there aren't many reasons except that everyone believes it will keep going down) then the I-fund would likely lag again.




The VIX was down yesterday but it is still relatively high, particularly for this time of the year. 2019 ended with the VIX in the low teens and it will likely end 2020 in the low 20's.




BND (Bonds / F-fund) was up again and still at the top of the 87.50 - 88.00, and may be looking to break out. If stocks do start the new year with a bullish move, I would expect this to go back down to test the bottom of that channel. However if stocks tank to start the year, we may have a bullish breakout for bonds coming.




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Thanks for reading. Happy New Year, everyone! Enjoy your long holiday weekend and we'll see you on Monday.

Tom Crowley



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