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I don't want to break everybody's spirit on the first trading day of the year, but we need to talk about what's really happening here.

If you're a trader, you should love this year. If you're an investor expecting to buy and hold your way to easy gains, you're about to get a painful education.

The market that carried you for the last four years just fundamentally changed. Most of you haven't noticed yet.

The Tide Just Started Going Out
 

Think of liquidity like water in an ocean. For the past five years, we've injected trillions and trillions of dollars into the global financial system through quantitative easing, new Fed lending programs, Bank of Japan stimulus, and Treasury Department restructuring.

When the tide rises, it doesn't matter what you bought - you could have bought anything and it would go up. You really had to go out of your way to run a bad business in US equity markets the last three to four years.

Here's what's different now: We likely peaked in that liquidity cycle in August. The tide isn't crashing out - it's receding. Slowly at first, then faster.

That flips the script. 

What the New Reality Looks Like
 

2026 is going to feel a lot like 2022. We're going to have rallies that just completely collapse. 

We're going to have hated rallies where everybody gets bearish, then sudden short squeezes that go on for months while everyone says "this isn't sustainable."

Then right when everybody goes "okay, I guess it's safe to buy," it sells off again.

Anyone who's been trading for a long time knows exactly what this feels like. It's not going to be "hey, I can just buy a hyperscaler and expect it to go up 100% randomly."

Things will get weird.

The Signals You Need to Watch
 

I've been tracking this through our momentum indicators - simple red or green signals that have avoided basically every major selloff since 2020. When this goes red, it's about capital and liquidity problems.

Right now, our Russell figure is still red, and that's what we're looking for strength to return in the next couple days. If it doesn't, that's bearish for the market to start the year.

The key thing to keep in mind: when liquidity was getting injected at full force, positioning didn't matter much. Now your margin for error is thinner. Discipline matters. Technical levels matter again.

How to Actually Trade This Environment
 

Stop thinking like it's 2023. YOLO stops working when liquidity peaks.

You need to know the difference between overbought and oversold. You need to use key technical lines as exits. You need to actively manage positions instead of buying and hoping.

Most importantly: understand that this isn't about interest rate cuts anymore. It's about how the Fed manages the underlying plumbing - the repo markets, the SOFR, the stuff they don't teach in college.

Pay attention to whether our momentum signal is red or green. Watch whether capital is rotating into defensive names or fleeing the market entirely.

If you can do that, you've got 99% of what you need to function very well in 2026.

The Bottom Line
 

The liquidity party that made everyone look smart for four years is ending. What's coming requires actual trading skills, not just diamond hands and hopium.

The traders who adapt to active management will thrive. The investors waiting for the next easy bull run are going to learn some expensive lessons.

Welcome to 2026. It's going to be different.

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