Along with other major indices, the S&P 500 closed Friday at 4839, setting new record closing and intraday highs. In a holiday shortened week, the S&P 500 started the week slow with a down day on Tuesday. Before Wednesdays open, the December retail sales number came in at 0.6% for its biggest increase in three months and beating 0.4% forecasts. However, the markets gapped down at the open and remained there with the S&P 500 closing at 4739, with the Bollinger Band Index (BBI) at a low of 26.36% (more to follow). Before Thursdays open, Decembers annual building permits number rose by 1.9% to 1.495 million, up from November's 1.467 million and above market expectations of 1.48 million. Additionally, Decembers existing home sales came in at a seasonally adjusted annual rate of 3.7 million, marking the lowest sales activity since August 2010 when 3.68 million sales were recorded. That said, the S&P 500 was muted until the afternoon when it turned bullish, closing just below record levels at 4780. And then came Fridays open which was flat until 1000 when the University of Michigan's consumer sentiment number soared to 78.8 in January 2024, a 21.4% year-over-year jump to reach its highest level since July 2021. Taking January and December together, consumer sentiment has climbed a cumulative 29%, the largest two-month increase since 1991 as a recession ended. From there we made a bullish charge with the S&P 500 having a daily gain of over 1%, closing at 4839, up 100 points from Wednesdays close and setting those new record highs. To put this in perspective, weve had 512 trading days without a new closing high, and there have been just five longer periods without one going back to 1952. Now lets look at the BBI more to follow from a technical perspective. In last weeks update we mentioned that the Bollinger Band Index (BBI) had shrunk to a low reading of 27%, and that a reading below 30% usually indicates that the markets are near the end of their consolidation period and could be poised for a breakout. As mentioned above, the S&P 500 BBI closed Wednesday at 26.36%. On Thursday the BBI reversed upward from Wednesdays low and closed at 26.83%, giving us that breakout signal. By Fridays close the BBI was at 31.30%. Taking this a step further, readings between 30 and 70 are in neutral territory. A reading above 70 combined with a reversal usually coincides with the end of a trend. The most historic BBI reversal case was on display during the initial COVID sell off. On 23 March 2020 the BBI had climbed to a high of 444.77% (signaling max volatility), and the S&P 500 closed at 2237. The next day the BBI reversed direction, signaling an end of that S&P 500 downward trend. It just so happened that 23 March 2020 was also the COVID low. For next week we have the GDP and Core PCE index numbers, followed by the Fed meeting decision on the last day of January. For TSP TIPS all three individual funds (C, S, I) composite scores remain in bullish territory, with the C fund also making a new all-time high on Friday. As such, we recommend no changes to our current investment mix.
Along with other major indices, the S&P 500 closed Friday at 4839, setting new record closing and intraday highs. In a holiday shortened week, the S&P 500 started the week slow with a down day on Tuesday. Before Wednesdays open, the December retail sales number came in at 0.6% for its biggest increase in three months and beating 0.4% forecasts. However, the markets gapped down at the open and remained there with the S&P 500 closing at 4739, with the Bollinger Band Index (BBI) at a low of 26.36% (more to follow). Before Thursdays open, Decembers annual building permits number rose by 1.9% to 1.495 million, up from November's 1.467 million and above market expectations of 1.48 million. Additionally, Decembers existing home sales came in at a seasonally adjusted annual rate of 3.7 million, marking the lowest sales activity since August 2010 when 3.68 million sales were recorded. That said, the S&P 500 was muted until the afternoon when it turned bullish, closing just below record levels at 4780. And then came Fridays open which was flat until 1000 when the University of Michigan's consumer sentiment number soared to 78.8 in January 2024, a 21.4% year-over-year jump to reach its highest level since July 2021. Taking January and December together, consumer sentiment has climbed a cumulative 29%, the largest two-month increase since 1991 as a recession ended. From there we made a bullish charge with the S&P 500 having a daily gain of over 1%, closing at 4839, up 100 points from Wednesdays close and setting those new record highs. To put this in perspective, weve had 512 trading days without a new closing high, and there have been just five longer periods without one going back to 1952. Now lets look at the BBI more to follow from a technical perspective. In last weeks update we mentioned that the Bollinger Band Index (BBI) had shrunk to a low reading of 27%, and that a reading below 30% usually indicates that the markets are near the end of their consolidation period and could be poised for a breakout. As mentioned above, the S&P 500 BBI closed Wednesday at 26.36%. On Thursday the BBI reversed upward from Wednesdays low and closed at 26.83%, giving us that breakout signal. By Fridays close the BBI was at 31.30%. Taking this a step further, readings between 30 and 70 are in neutral territory. A reading above 70 combined with a reversal usually coincides with the end of a trend. The most historic BBI reversal case was on display during the initial COVID sell off. On 23 March 2020 the BBI had climbed to a high of 444.77% (signaling max volatility), and the S&P 500 closed at 2237. The next day the BBI reversed direction, signaling an end of that S&P 500 downward trend. It just so happened that 23 March 2020 was also the COVID low. For next week we have the GDP and Core PCE index numbers, followed by the Fed meeting decision on the last day of January. For TSP TIPS all three individual funds (C, S, I) composite scores remain in bullish territory, with the C fund also making a new all-time high on Friday. As such, we recommend no changes to our current investment mix.