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TSP Talk: Ladies and gentlemen, the Santa Claus Rally

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Santa is in the building! Stocks rallied to start the official Santa Claus rally. Because of the historical bullish bias of the week before Christmas, I generally consider the Santa Clause rally to start the week leading up to Christmas, which we saw was quite good this year, but historically Wall Street considers the week between Christmas and New Years, plus the first two trading days in January, to be the official dates. Whatever you called it, it worked yesterday as the Dow and most indices climbed 1% or more. Small caps lagged a bit, and bonds were up slightly.

Daily TSP Funds Return
I rarely take any time off during the year so as long as the market cooperates and the seasonal bullishness continues this week, I may keep things pithy to give myself, and you, a little bit of a break. I will be traveling most of Wednesday so Thursday's report may really be a quickie.

The action over the last four days has been quite strong. There are still four days left in the New Year, and this is the Santa Claus rally, but should anything change in the coming days that could shake up this rally, it could be a tell for the start of 2022. There is a tendency for a strong Santa Claus rally to translate into a good start to a New Year, but the opposite is also true. If we see any faltering during this week, that could bleed into next week. And that is my focus now... how aggressive I want to be going into 2022.

This old chart from 2011 (data from 1950 - 2011) shows what I was talking about - the Santa Claus rally going through trading day #2 of the New Year, and you can see that there can be some profit taking after those first couple of days.

Chart provided courtesy of

Here are a couple of charts that I want to see remain bullish as they tend to lead the market. The First is the Dow Transportation Index, which I posted yesterday, but the action on Monday helped push this more firmly above resistance so it's considered a breakout of sorts. There's more resistance above, but there's some room to run before it gets there.

This chart I highlight more often in our Plus reports because it represents the strength (or weakness) of the credit market, and when the credit market is strong, stocks don't tend to get too hurt. This one bottomed out in late November, about a week before the S&P 500 did, giving us a nice head's up to the upcoming rally in stocks. It also held up well when stocks pulled back a couple of weeks ago, actually creating a bull flag, hinting that the decline in stocks could be bought.

The stock market is open this coming Friday. It hasn't posted on but I assume the TSP will be closed for the holiday, so no transaction would be processed on Friday. That means you must decide by Thursday morning, where you want to have your money to start the New Year. If that's not the case I will update this once the TSP lets us know.

Admin Note: The AutoTracker will rollover to the New Year this weekend. If you haven't logged in in a while, this would be a good time to do so to avoid having your account go into inactive mode. Also, if you are not on the AutoTracker, this is a good time to start so that we track your full year in 2022. I did find a bug that may have been preventing new users from creating an account, but that has been fixed. Really sorry if that effected you.


The S&P 500 / C-fund has now been up for four straight days after a big positive reversal off the lows just 5 days before. That's about 250-points since the lows last Monday, and I doubt it can keep this pace up, but even a couple of flat days would be a relief. Just as long as we don't get a headline that flips things over quickly like we saw at the November highs. Volume was light as we'd expect and there were no surprises so the bulls remained in charge. At this point, rather than more straight up action, a little action "F" flag would be nice, which would keep the underinvested chasing and keep a bid under the market. Of course "F" flags eventually break down, but they can go on few a while before they do.

The DWCPF (S-fund) is fighting some resistance and that may be why it lagged some yesterday. That orange moving average may be the key to whether this bounce off the lows created a bottom, or just a dead cat bounce.

The EFA (I-fund) rallied and seems to be heading toward its prior highs. The dollar was up slightly and wasn't much of a factor yesterday.

BND (Bonds / F-fund) was up slightly on Monday.

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

Tom Crowley

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