TSP Talk Blog

Stocks opened higher on Tuesday, and in typical holiday week fashion, the bears weren't really around to put any pressure on the rising prices. That could change today but yesterday the indices tacked on more than 1% almost across the board. One hiccup was the market leading Dow Transportation Index which closed well of its highs of the day, although it did hold onto a 0.27% gain. Bonds were up as yields and the dollar slipped lower.

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Trading volume continues to get lighter and lighter as we head into the holiday and today, being a big travel day, it will likely be even lighter and the bulls do tend to get an advantage when institutional and professional traders take time off. The one catch is that if there is some kind of a news event that is detrimental to the stock market, the light volume could could cause an overreaction and magnify a negative move.

We do have a catalyst today that could have that impact, the release of the FOMC meeting minutes, but I suppose that news does not have to be bad. Just be ready for some volatility in the indices around 2pm ET.

If we can get past that, then historically the Wednesday before Thanksgiving, and the Friday after, each have a very strong record. I know I am repeating myself from prior commentaries but in more recent years it has been very common to see the Friday after Thanksgiving go in the opposite direct of Wednesday's action. That has happened in 8 of the last 9 years. So this chart's data, which goes back 62 years but ends in 2011, is a little misleading. Since 2013 the chances of two up days or two down days has been the anomaly rather than the norm. One thing that has been consistent is the weakness after Thanksgiving weekend.


Chart provided courtesy of www.sentimentrader.com


Yesterday's action was quite bullish and the question on everyone's mind is if it is holiday related, or something more bullish? Volume was very light so that's a clue, and the lopsided breadth in favor of the advancing issues and share volume is more typical around holidays.



Yields and the dollar were down so that helped push prices higher in stocks, bonds, and commodities yesterday.




The next two charts are the short-term and longer term charts of the S&P 500. The short-term chart on top shows the bull flag breaking out to the upside, which is a very good sign and indicates that there may be more room on the upside. That's a typical bull flag reaction but that hasn't always been the case during this bear market, so this is good news.



However, the longer term chart of 2022 shows that the upside may be limited even with that breakout, if the long resistance line off the highs holds. There is about 100-points on the upside just to test the resistance if the holiday rally wants to get frisky, but the higher it goes, the riskier things get for the bulls.

I will post a brief commentary on Friday to go over Wednesday's action and, outside of the FOMC meeting minutes, hopefully there won't be too much to talk about except a "quiet" and cooperative market during this holiday week.

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The S&P 500 (C-fund) popped higher and overachieved from a typical pre-holiday rally. Notice how close it is getting to the plethora of overhead resistance. It's 18 points below the 200-day EMA, which swatted it down last week, so add the 200-day simple average (orange), the open gap near 4070, and the long-term resistance line just below 4100 that isn't shown here but was in the chart up above, and something is going to have to give soon.




The DWCPF (small caps / S-fund) came back strong after lagging for most of the day yesterday. The bad news here is that it had been lagging. The good news is, there is more room above before it hits resistance. It's one of those glass half full or half empty situations.




The EFA (I-fund) was up again and the pullback in the dollar helped push this already stretched index toward its recent highs. It's the hot hand, to be sure, but the higher they go, the harder they fall if stocks do rollover after the holiday.




BND (bonds / F-fund) had a good day and it continues to push up against what appears to be resistance, although those support and resistance lines are fairly subjective on this chart. It looks bullish but it will have to get above that resistance line, although I supposes it can continue to slide slowly up below it.




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Thanks so much for reading. Have a great Thanksgiving and we'll see you back here on Friday for a brief update.

Tom Crowley




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