TSP Talk Blog

Stocks were screaming higher at the open on Monday, and as it sometimes goes, emotional Monday morning openings, especially with a gap, can fail. The Dow remained positive but it lost a 300+ intraday gain in the last hour of trading. The S&P 500 saw a similar fate, and the Nasdaq and small caps lagged most of the day. Bonds fell as yields rallied, and the dollar has been unstoppable lately.

Daily TSP Funds Return More returns

Yes, that was quite the swan dive off the cliff for the Dow and S&P 500 (SPY) yesterday, and if you were feeling good and celebrating the gains in stocks in the morning, you were humbled by the close.




Yields shot up, as did the dollar, and the concern of the Fed raising rates is always in the air when that happens, but there seemed to be more to it than that yesterday. For the 10-year yield, it could be the start of a pre-holiday reversal from last week's pullback.



The dollar however, kept its direction intact and a strong dollar like this will put pressure on prices. The S&P 500 was trying to hold up last week, and the Nasdaq actually did very well, but we've seen small caps struggling with the dollar moving higher. That's actually interesting because large cap stocks generally do worse when the dollar is strong because international sales tend to decrease for U.S. companies when it takes more foreign based currencies to buy something in U.S. dollars overseas. For example, if it costs $1 to buy a Coke in England in dollars, that is about 0.75 pounds. If the dollar goes up in value versus the pound, it will take more pounds to buy that Coke. Magnify that by millions, and you can see why a Boeing type of stock would be down 2% on the day.


As I have said before, seasonality is not usually a primary indicator, but surrounding some major holidays it can be. I posted this chart yesterday and it suggested that the Monday before Thanksgiving tends to underperform. It didn't look that way at the open, but that's how it ended up. The next three days tend to be much better for the S&P 500 so the market and the bears will have a test starting today.


Chart provided courtesy of www.sentimentrader.com


The November chart also showed November 22nd being an ugly duckling and has only been up about half the time with a negative return over the last 30 years. However there is a sea of green for a week or so starting on the 23rd on the chart.


Chart provided courtesy of www.sentimentrader.com


Of course we could look at these charts all day and even if it suggests the S&P 500 is up 80% of the time on a particular day, which would be one of the strongest days of the year, it means it is still down 1 out of 5 times. Today's data (23rd) has a nice green line, but it is only up about 55% of the time, so it's down 45% of the time. Tomorrow is one of those 80% days. We'll see.

From tsp.gov: Holiday Closing: Some financial markets will be closed on Thursday, November 25 in observance of the Thanksgiving Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Thursday night (November 25) will be processed Friday night (November 26), at Friday's closing share prices.

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The S&P 500 (C-fund) was breaking out at the opening bell yesterday, but that late sell off took it all away, and a near 1% gain turned into a loss. Now the chart has some issues with that negative outside reversal. That usually means at least some short-term trouble the following day. But here we are setting up in front of a strong three day period surrounding the holiday to finish the week. So technically, there are some issues. Emotionally, the light volume trading tends to favor the bulls. Heads or tails?




The DWCPF (S-fund) lagged all day. It lagged the small caps of the Russell 2000 index, and it lagged the large caps. What was going on here? I'm not sure because we are heading straight into small caps season, although it seems like small caps season went from the January effect, to a December delight, and this year perhaps it was the October-fest for small caps? It gets earlier and earlier each year as traders try to front run each other for the gains.




The EFA (I-fund) is following the September lead as it broke meaningfully below the blue box and now its 50-day EMA, and every rally in the dollar is putting more and more pressure on this fund. The I-fund price may look better than this since the selling came late in the U.S., but the TSP will make that up in today's price.




BND (Bonds / F-fund) tanked with yields spiking and now that head and shoulders pattern is almost complete. This is a holiday week so we could see some unnatural behavior, but a breakdown may be inevitable in the coming days / weeks.




The Dow Transportation Index managed to close with a big gain of 1.34%, but it was up well over 2% in the morning trading, so there's a good news, bad news situation here. Good gains, bad negative reversal.




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

Tom Crowley


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