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TSP Talk - Whose story is more compelling?

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The holiday action has favored the bulls, despite some weakness in the Nasdaq. It did take a last minute rally to push the S&P 500 out of negative territory during Friday's shortened trading day, but the Dow had a solid triple digit gain and the more aggressive S and I funds had very strong days. Bonds were hit hard as yields moved up and may have broke resistance, and the dollar moved down again helping that I-fund lead the way on Friday.

Daily TSP Funds Return
It's been a weird year with a lot of back and forth - mostly all one way or the other, but with just over a month to go in the year, the S&P 500 is still enjoying a 20% gain. The S and I-funds are a little more than half that with gains of 12%, but they've been acting well lately and may try to catch up if the bond market and the dollar cooperate. Obviously those markets are impacted by the economy and interest rates.

The action has been bullish and the holiday atmosphere certainly helps, but the outlook for the economy and the forecasts from several prominent analysts and financial institutions are all over the map while the bulls have moved to another level of complacency with the VIX closing at its lowest level in three years.

There are several bright and respected individuals like Tom Lee, Jeremy Siegel, and throw a Jim Cramer in there, that are quite bullish on stocks going forward. Then there's people like Mike Wilson of Morgan Stanley who predicts a flat year for stocks in 2024, John Hussman of Hussman Funds who believes bonds will be outperforming stocks over the next decade, and Goldman Sachs who has a 2024 target on the S&P 500 at 4700 for 2024. It's currently 4559 so that's just 3% from here.

So who knows? I don't make long term predictions like that. I prefer to look at the charts and try to figure out where it is going next, in a shorter time frame. That's not easy either. As I have mentioned before, I did miss all of the 2022 bear market losses by being defensive and making a very small gain for the year, but 2023 has got me good. I have been flipping while the market has been flopping, and flopping when it's flipping, and I'm only flat for the year, so the buy and holders got me back so far this year.

But if you think buy and hold is the answer, you might want to read some of the very detailed analysis by John Hussman, who I just mentioned. He's often quite bearish so he misses some rallies, but he's made some great sell calls before some major market declines in the past.

As I mentioned above, his models are projecting that the S&P 500 will lag bond yields by about 8% over the next 12 years. That could be devastating for anyone entering retirement, implying that we won't see big gains in the S&P for some time like when interest rates were 0% for the last 15 years before the Fed started hiking last year. Click the chart if you want to see those projections better.

Chart source:

The Yield on the 10-Year Treasury jumped on Friday. I don't know how much we can trust Friday's light volume trading, but it did break above a falling wedge pattern. There is a lot of resistance just above 4.5%, which is where the neckline of that head and shoulders pattern passes, so we'll see if any upside follow through this week stalls there or not. The stock market seems OK with 4% to 5% yields now, preferable 4.5% and lower, so now it may be more about stability. If the yield starts to back off and go much lower from here, it would be the bond market betting on economic weakness.

While yields were rallying on Friday, the dollar was falling, which was great for the I-fund, but the dollar has been moving more in sync with yields recently so we may see what happens if these two start breaking away from each other.

The price of oil is another indicator, like yields, where the market prefers lower levels, or at least we do, but if they start looking too weak, then it could be an indication of economic weakness, and we know there's a lot of talk about a recession coming at some point, either next year, or even early 2025. This chart of oil is looking like it wants to go lower.

This old seasonality chart surrounding Thanksgiving, which goes from 1950 through 2011, is probably more telling than the more recent years when interest rates were 0% from about 2008 through 2021. The charts suggest some possible profit taking this week.

Chart provided courtesy of

We'll get a 3rd quarter GDP estimate on Wednesday, and key inflation data on Thursday with the PCE Prices and the Personal Income and Spending reports.

The S&P 500 (C-fund) filled the open gap from late July last week, and sometimes that can be an area of resistance - or it could try to push toward a double top test above 4600. The open gaps are obvious and I would find it hard to believe this could blast off to new highs before filling at least one of those gaps first.

DWCPF (S-fund) has been doing quite well lately, although when it is down, it seems to fall hard, at least 1%, so there seems to be a love / hate relationship with traders and investors. They've cleared some important resistance areas, but like the S&P chart above, the open gaps below may be too big to ignore.

EFA (I-fund) just saw the 50-day EMA pass above the 200-day EMA, which is a bullish indication for the intermediate-term, but it's also a sign of being overbought in the short-term, and at the risk of sounding like a broken record, I count four open gaps below.

BND (bonds / F-fund) was down sharply on Friday with yields moving up. The chart fell back below its 200-day EMA on Friday, after three closes above it earlier in the week. Open gaps and being back in that wedge-like channel, could mean some backing and filling is due.

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

Tom Crowley

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S&P500 (C Fund) (delayed)

( Real-time)
DWCPF (S Fund) (delayed)

( Real-time)
EFA (I Fund) (delayed)

( Real-time)
BND (F Fund) (delayed)

( Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes