TSP Talk Weekly Wrap Up

Stocks pulled back last week as we hit a weak spot between the big jobs report and the typical late December Santa Clause rally. Historically, that’s typical so the question is, how much concern should we have going into this week after last week’s losses?

We came into this past week following a big jobs report that took the Dow up nearly 200-points. As we mentioned last week, we often see large reactions caused by the jobs report get reversed during the following week, so the pullback last was typical action. But now what?

Here are the weekly, monthly, and annual TSP fund returns through Friday, December 13…

The S&P 500 (SPY / C-fund) is still trading above the 50-day EMA but we are seeing some potential cracks in the technical picture after a rising wedge (black) broke down to start the month, and now the narrow rising parallel trading channel has given way after the double top failure on Monday.

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

I always consider seasonality a piece of the analysis puzzle when it comes to stocks, but it becomes a more significant piece of that puzzle around the major holidays when the tendencies are more apparent. This December seasonality chart below shows just how strong the positive bias is as we head into the latter half of the month. Monday will be the 11th trading day in December so we are coming toward the end of the weaker stretch, as I mentioned above, between the jobs report and the typical Santa Clause rally. Day #13 and #14 have positive average returns but they are actually down more often than up so we’re not out of the woods yet seasonality-wise.

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

But before you go betting the farm on stocks, nothing is 100%. As you can see above, even at the peak during the final 5 trading days in December, the percentage of times those days are positive are between about 63% and 69% of the time. That is a big advantage but it’s not 100%.

Last year the market actually struggled during that week final week or so, until things turned around on December 31.

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

Bonds broke down technically last week on some of the charts so be careful in the F-fund.

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 TSP Talk Market Commentary.

Tom Crowley
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Thelegal stuff: This information is foreducational purposes only! This is not advice or are commendation. Wedo not give investment advice. Do not act on this data. Do not buy,sell or trade the funds mentioned herein based on this information. Wemay trade these funds differently than discussed above. We useadditional methods and strategies to determine fund positions.

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