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Tricky January
Last week saw very light holiday trading activity and the indices were
mostly unchanged, that is except for the international stocks, which
outperformed because of the recent weakness in the dollar.
For the
TSP, the C-fund slipped 0.02%, the S-fund
dropped 0.48%, the I-fund gained 0.53%, and the F-fund (bonds)
was up 0.34%.
For more on the weekly, monthly, and total 2010 returns, please see our
TSP Weekly Wrap-up.
The situation in the S&P 500 didn't change very much last week as the
trading range was extremely tight. The market was overbought, but
the sideways action did help move some indicators closer to a neutral
reading, and bring down some of the excessive bullishness we had been seeing
out there.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
So much so, that
the TSP Talk Sentiment
Survey System gave what I would call a surprise buy signal for this week.
I did not expect to see the bulls (46%) to bears (39%) ratio (1.18 to 1) to
move below the 1.26 buy level so quickly after the 3.20 to 1 ratio, and sell
signal, we saw the prior week. Yet the system, which finished 2010 at
+35.2%, is now back in the S-fund.
January can be a tricky month. While historically it is generally
positive - the fifth best month return-wise from 1950 to 2005 - the swings
can be tough to play.
Chart provided courtesy of www.sentimentrader.com
When stocks are stuck in an extremely tight range as they have been for
several days, it is not uncommon to see a 'false' breakout. In other words,
whichever way this market decides to break, it could be a tease that is
reversed in the coming days.
You can see some of that in the
New Year's performance chart. The first few days in January have a
positive bias, particularly trading day #2, but days 4 and 5 have a negative
bias.
Chart provided courtesy of www.sentimentrader.com
Holiday trading in general can also be tricky. While stocks did little last
week, the dollar fell sharply. Now if this is typical holiday trading,
a pre-holiday drop, could lead to a post-holiday reversal.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
I have no idea which way this market wants to go this January, but I am
starting the year split 50/50 between the stock funds and the G-fund.
Should stocks rally in the first few days, I might lock in some gains and
move out of the stock funds completely for a while. On the other hand,
if stocks drop in the first few days, I may put the 50% I have in the G-fund
and move 100% into the stocks funds.
This would be my way to play any "false" breakout we may see.
And with the very tight trading range we have been in, we should see this
breakout, or false breakout, pretty quickly.
The final 2010 AutoTracker returns have been posted on the main
AutoTracker page.
Congratulations to all of the leaders, and thanks to everyone who
participated.
Our TSP Talk Sentiment
Survey System took the top spot out of over 500 accounts. It had a
great year, but past performance is no guarantee of future results so be
careful.
Thanks for reading! We'll see you back here tomorrow!
Tom Crowley
Click here to discuss today's Market Commentary
Administrative Note:
One of our long time forum members, Intrepid_Trader, will be starting a new
Premium Service here on TSP Talk. Intrepid developed his own trading
system and has had very good success over the years trading his TSP account,
and IRA accounts, and has been consistently near the top of our
AutoTracker.
We are offering a free trial to the service for the next several weeks.
You just need to create a login and password in the
premium services area (if you
don't already have one.) No payment information is needed. Just
create an account. Sign in, and you will have immediate access to
Interpid Trader's Investment Strategies Reports.
The reports will be available by 10:30 AM ET each morning, but his active
system signals are not always known until 11:00 AM to 11:30 AM ET, so could
see multiple updates on some mornings. Because of this, you may want
to either get into the habit of checking the reports each morning after
11:30 AM ET, and/or sign up for the Intrepid trader
email alerts.
We will send the emails, but unfortunately we can not guarantee that you
will receive them timely as not all mail servers are created equally -
especially your work servers, which are likely putting the emails through
several filters.
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