TSP Weekly Wrap-Up – Breakdown or Breakout?

Hi everyone – It’s your weekly dose of TSP Talk from www.tsptalk.com.

Stocks and the TSP funds were mixed last week as we saw strength in some areas of the market, and some weakness in others. The dollar continues to play a key roll in our TSP accounts.

For the week, the small and mid-caps of the S-funds led the way with a decent 1.78% return. The C-fund slipped 0.35%, and the story remains the same for the I-fund. It fell 1.05% because of more strength from the dollar. The F-fund (bonds) added 0.12%, and the G-fund picked up its typical meager 0.06%.

For the month of December, the C and S funds remain positive but the rally in the dollar in December has been too much for the I-fund, and it is now down 0.79%, while the F-fund is off 0.59%. Here is what has happened to the dollar this month…

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

The S&P 500, which is what our C-fund tracks, is still consolidating. We were looking for a breakout to the upside on the last move higher, but instead it came back and tested the lower end of its recent trading range again.

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

Perhaps this coming week will be more accommodating for the bulls, as we still have not had a Santa Claus rally, and we are due. Here is a chart of the S&P 500’s 55 year average (between 1950 and 2004) daily returns of the trading days surrounding the Christmas Day, and percentage of times they were positive.

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

-1 represents the trading day before Christmas, which this year would be Thursday 12/24, and it’s 55 year average return was almost 0.3% and it is positive about 70% of the time.

+1 would be the trading day after or Monday 12/28. -5 was this past Friday, and +4 is New Year’s eve, etc.

The seasonal data is very strong but not every year ends on a high note as it might suggest. I suspect this year will due pretty well, but the market never ceases to surprise me, and if the S&P 500 decides to break below that trading range we pointed out above (which would be below about 1083), it would be a pretty good warning sign for us.

Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up. Our market commentary is updated daily on www.tsptalk.com

Tom Crowley
TSP Talk