TSP Talk Weekly Wrap Up

Stocks started the week with some selling but things turned around by Thursday morning; moving almost straight up after the Philly Fed Report which actually came in much weaker than expected. Investors saw this as a sign that the Fed will be less likely to taper their quantitative easing program any time soon as bad economic news continues to be good news for stocks because of this easy money from the Fed.

By the end of the week the indices were mostly flat although the S&P 500 (C-fund) did have a modest +0.42% gain for the weak.

Here are the weekly, monthly, and annual TSP fund returns through Friday, November 22:

The S&P 500 (SPY) is flirting with a possible breakout out of a rising wedge pattern. Rising wedges are actually considered bearish patterns so we’ll have to see how investors respond to this formation and resistance in the coming week.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The Dow Jones Industrial Average has been acting a little differently than most of the broader indices, and the 6-month sideways consolidation formation broke out to the upside earlier this month. It looks like it has come a long way since the last time it tested the bottom of that sideways trading range, having moved from 14,700 to over 16,000 in just over 6 weeks. But these long consolidations can actually be springboards to big rallies once they are broken.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

This chart from 1997 – 1998 shows two examples where the S&P 500 consolidated for several months before breaking out. The longer the consolidation, the more explosive the rally was coming out of it. Is the Dow ready to give us one of these types of rallies?

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Of course being a market timer and not a buy and hold investor, we can see that what goes up, almost always eventually comes down as all of those gains were taken away in just a month and a half in the summer of 1998. That’s why you need to be on your toes and watch for breaks in the trend so you can try to avoid these kind of declines when possible. A breakdown could happen this coming week, or 6 months from now, but if you miss it, it could be costly.

Bonds had a small rally this past week but the charts still look quite bearish for the intermediate to longer-term. The AGG may be looking at an initial downside target of about 106 should that little head and shoulders pattern break – which they tend to do.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Happy Thanksgiving everyone. Enjoy your holiday shortened week.

Good luck, and thanks for reading. We will be back here next week with another
TSP Wrap Up. You can read our daily market commentary at http://www.tsptalk.com/comments.html.

Tom Crowley
Weekly Wrap-Ups Archive
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The legal stuff: This information is for educational purposes only! This is not advice or are commendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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