The last trading day of the year, and the first few days of a new year have an historically positive bias and that trend held this year as we saw very solid gains in the stock funds this last week.
Here are the TSP fund returns for the week of December 31 through January 4.
We had been concerned with the outcome of the fiscal cliff negotiations, and while we didn’t see the country’s problems solved, we did avoid seeing income tax rates go up on all Americans. We also saw the end of investors selling to get the lower capital gains tax, and as we have been talking about on TSP Talk, that triggered some buying once the year ended and the new year started. The same thing happened at the end of 1986 into the beginning on 1987 – the last time capital gains tax rates increased.
The S&P 500 continues to follow the pattern that we saw last spring and into the summer. Whenever I see a repeating pattern, I keep watching with interest until it abandons the pattern. If the pattern continues it looks like the upside trend will continue, but the action could be choppy as it tests and retests the major moving averages.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Seasonality suggests a little profit taking could take place this week as Monday will be trading day #4 this month.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
Right now the charts look good, but the action could be related to fiscal cliff relief and the capital gains sellers jumping back into stocks. We will have to deal with the debt ceiling negotiation in the coming weeks so the drama will likely resume. This could set up good trading opportunities, if you can handle the volatility.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
Tom Crowley
www.tsptalk.com
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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