While there is still one day left in the famed Santa Claus Rally (SCR), the S&P 500 would need to close above 5974. That’s a tall task given that it closed at 5869 last night. Assuming we don’t see a 100 point rally the SCR failure would usher in some bearish studies for Q1. I will touch on those next week. For sure, detractors will claim that the SCR failed last year and 2023 was a monster year so we should take 2025’s failure with a grain of salt. The bulls’ biggest hopes for today rest in the fact that today is among the most seasonally positive days of the year.

Besides the SCR, we also have the January Effect where small cap stocks outperform large caps. And the January Barometer which says as goes January so goes the year. As with most adages, do your own homework. Rigorous research usually dispels some of these claims and myths.

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My thesis was for the SCR to succeed with new highs in early January before a longer and deeper decline took shape. That scenario is clearly wrong at this point. While there could be a day or few bounce, it is looking more and more like the decline has started and has further to go. Sentiment was way, way overcooked to the bullish side and is now just starting to back off. Market internals mostly peaked in November and early December and they continue to weaken.

2025 – The Year Momentum Died

On Tuesday we sold PCY and TQQQ. On Thursday we bought EMB, EWS, BJAN, NJAN, KJAN, CEFS, more GDX, more NUGT, more BLNDX and more STBNX. We sold FXI, RSPN, ABFL, FDD, FDVV, QMNV, some IYR and some LFEQ.

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