'Santa' Still in the House, Silver Retreats, S&P Holds Above Pivot, Week Ahead
Round and round we go as the start of another holiday-shortened trading week begins. Here's what to know to be prepared.
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I knew right from the beginning
That you would end up winning
I knew right from the start
You'd put an arrow through my heart
'Round and 'round, we'll all find a way, just give it time
'Round and 'round, what comes sound goes around, I'll tell you why
- "Round and Round" Smith, Mills, Cottrell, Showes (Ratt) 1984
Hello! Is This Thing On?
Quiet. That's the word that best described the action or lack thereof on Friday. Really quiet for the three-and-a-half-day week in its entirety. I'm not complaining. More like observing. You there. Me here. The other guy elsewhere. Assorted financial market junkies played and will play the game from their respective hovels. Human contact. Who needs it?
We are so much more efficient, and so much more productive in this modern era, we can work from anywhere. So, we often do... indeed, work from anywhere. We have all but forgotten as a nation and as individuals that smart people working with other smart people make each other smarter. Sometimes much smarter.
I know my IQ. Roughly. It changes over time. I was tested when I was young. It was high enough. I was tested when I was a little older. It was higher still. I was tested again when I was middle-aged. Yup, higher again. I will tell you this. As one ages, as long as one continues to strive, one accumulates knowledge and one learns to get better at taking tests. That said, often working in a silo, I can only be as smart as I can be. There is a limit.
Working with others who are also passionate about what we are trying to accomplish? Building on each other's ideas and working collaboratively to find a way or many ways to get things done?
I may have been younger back then. My IQ scores might have not been wherever it is that they ultimately peaked, but I'll never be smarter. I definitely miss the human race.
The Past Week
Major U.S. equity indexes closed out the holiday-shortened penultimate week of 2025 with impressive gains despite the weak attempt at profit-taking by the humans who did show up on Friday and the algorithms that now run the show. The rally for the week appears stronger still if one goes back a full five days or "all the way" back to the lows of Wednesday, December 17.
Trading volumes dissipated last week due to the Christmas holiday and as a reaction to the massive levels of trade that occurred the Friday prior to last, which was a "triple witching" expirations event. The focus moved from the pre-Santa Claus rally to the actual "Santa Claus rally" period. That party, which runs from Christmas Eve through the second trading day of the new year, typically produces a gain 75% to 80% of the time, historically, averaging a roughly 1.6% return.
That said, Santa has not turned his little trick since December 2022. Maybe now that humans have been almost completely removed from any decision making at the point of sale, some of our old market adages will have to evolve. I would say that if Santa does a "Bugs Bunny" and goes "Oh for Three" that perhaps, we'll have to adapt.
Adaptability is what separated Homo erectus from Homo habilis. Erectus evolved into Heidelbergensis, and we along with our Neanderthal and Denisovan friends, were then on our way. So, I'm saying we're not quite done, but we are going to have to get a lot smarter than we have been. We really don't have a choice.
The highest-profile headline of the past week was the Q3 U.S. GDP report that was released by the Bureau of Economic Analysis. The headline print of 4.3% q/q, seasonally adjusted, annualized growth pretty much shocked all of academia and stuffed all of their collective arrogance back into the little box from whence it came.
Still, as I noted last week in my "zero dark-thirty" musings here at TheStreet Pro, there were enough cracks in the pavement of that GDP report to cause concern. My primary concern at this time would be a decoupling, due to an undeniably improving level of productivity per worker (thanks to generative and agentic AI), of the statistical relationship between economic activity and demand for labor. Yes, this will all be deflationary. Prices for bread and milk will diminish, but so will your ability to demand higher wages. The concept of a strong economy existing simultaneously alongside a weak labor market is not at all far-fetched.
The Here & Now
- Asian and European equity markets opened Monday trade on a moderately weaker note as traders appear to be making more of an effort to take profits, especially in the tech space than they did on Friday. Then again, in my opinion, it's really all just gambling ahead of the opening bell ring at 11 Wall Street, even if my human pals are in short supply.
- On Sunday evening, President Trump commented that "a lot of progress" was made in peace talks with Ukrainian President Volodymyr Zelenskyy. Trump said that he would be willing to speak to the Ukrainian parliament or hold a trilateral meeting with Zelenskyy and Russian President Vladimir Putin. For his part, Zelenskyy mentioned that a peace framework as "90% agreed upon" and that a U.S.-Ukrainian security guarantee was all but agreed upon, but that the future of the Donbas region in eastern Ukraine remains a problem. Watch defense stocks this morning for clues on how well these talks are really going.
- Silver is taking some lumps this morning. I see the white metal trading roughly 3% lower through the wee hours after trading through the $80 per ounce level late Sunday night, apexing close to $84. I currently see silver trading just below $75. Gold has taken a similar overnight ride as has Bitcoin. The world's best-known cryptocurrency traded above $90,000 per token overnight and has now given all of those gains back.
The Week That Was
To refer to last week's market action as sleepy might not be much of an exaggeration. For the week, in aggregate, the membership of the S&P 500 posted the group's lightest total weekly trading volume since Christmas week 2024. Digging deeper, aggregate trade across the Nasdaq Composite came to roughly 5.17 billion shares on Friday.
For that index, this was the lightest trading day for the year with the exceptions of the half-days of trading on Black Friday and Christmas Eve. Incredibly, trading was considerably heavier on the July 3 half-day this year than it was for the full session this past Friday.
Over the past week...
- The S&P 500 gave back 0.03% on Friday but gained 1.4 for the week.
- The Nasdaq Composite lost 0.09% on Friday but added 1.22% for the week.
- The Nasdaq 100 lost 0.05% on Friday but gained 1.18% on the week.
- The Russell 2000 surrendered 0.54% on Friday but still gained 0.19% for the week.
- The S&P Small Cap 600 backed up 0.07% on Friday but added 0.53% for the week.
- The S&P Midcap 400 closed unchanged on Friday, still gaining 0.69% over the week.
- The Dow Transports lost 0.13% on Friday but tacked on 0.51% for the week.
- The Philly Semis gained 0.05% on Friday and 1.98% on the week.
- The KBW Bank Index gave up 0.08% on Friday but added 1.8% for the week.
On Friday, five of the 11 S&P sector SPDR ETFs closed out the session in the green, led by the Materials (XLB) , but it was the defensives that outperformed both growth and the cyclicals. Consumer Discretionaries (XLY) brought up the rear. The top performers in the S&P 500 on Friday were surprisingly Target (TGT) after the Financial Times reported that Toms Capital Management had made a "significant" investment in the struggling retailer.
For the week, ten of the 11 S&P sector SPDR ETFs traded higher, again with the Materials in the lead, followed by the Financials (XLF) and Technology (XLK) . Micron Technology (MU) and Nvidia (NVDA) led the semis, and the semis led tech. The Staples (XLP) were the only sector SPDR to close lower on the week.
The Charts
Readers may recall that I updated my daily chart for the S&P 500 last Wednesday (Christmas Eve). That kind of market-wide update is something I normally only do on Mondays as I do a lot of my chartwork on weekends.
Just a reminder, we had gotten rid of the cup with handle and the pending double top at that time. We showed readers an ascending triangle pattern of bullish trend continuance, that appears to have held pivot through Friday's light-volume attempt at a selloff. By the way, Santa is still, at this time, in the house.
Readers will note that after cracking the upside pivot during Wednesday's shortened trading hours, the S&P 500 remained above that line throughout the Friday session. I see that pivot as 6903, so there is some wiggle room.
Relative Strength has been steadily improving for almost two weeks, is better than neutral, but still a long way from reaching an overbought state technically. Below the chart, we have a daily MACD (moving average convergence divergence) that sports a histogram of the 9-day EMA (exponential moving average) that has now been in positive territory for three successive days, and a 12-day EMA that crossed above the 26-day EMA last week.
In addition, both those 12-day and 26-day lines are both well above the zero-bound. These are all short-to medium-term bullish signals without a single bearish signal on this chart (opinion).
The GDP Game
Last week, the Atlanta Fed issued their GDPNow model's initial estimate for the fourth quarter at growth of 3.0% (q/q, SAAR). Among other regional central bank district branches running close to real-time GDP models, the New York Fed's revised its estimate for Q4 economic growth upward from 1.71% to 2.07%. The Cleveland Fed revised their view for Q4 up just a tad from 2.83% to 2.85%. The St. Louis Fed, which has missed the mark quite badly so far in 2025, is at growth of 1.18% for Q4.
Fed Funds Futures
Fed Funds futures trading in Chicago are now pricing in just an 18% probability for a 25-basis point rate cut on January 28 when the FOMC next meets on policy, down from 21% last week at this time. The FOMC will look different by then as Boston, Chicago, St. Louis and Kansas City have lost policy voting rights as part of the Fed's regular annual rotation. Cleveland, Philadelphia, Dallas and Minneapolis will gain policy voting rights for 2026.
At present, there are now 50 basis points worth of additional rate cuts fully priced in (65% chance, down from 77%) for all of calendar 2026.
On the Docket
Last week was Christmas week. This week is "New Year's week. For the second straight week, Thursday is a national holiday. Banks and financial markets will again be closed. However, unlike last week, as it is the final day of trading for the calendar year, Wednesday will be a full session. There will be no early closes for financial markets that day.
-- The Federal Reserve will again, largely be in holiday mode this week. Must be nice. The central bank will, however, release this Tuesday afternoon, the Minutes of the policy meeting that culminated on December 10.
-- The macroeconomic calendar will be light again this week as it was last week. There are no true headline releases on the way. We will see November Pending Home Sales later this morning, October home prices on Tuesday morning, and the weekly filings for initial jobless claims on Thursday morning.
-- The earnings calendar is basically a complete zero this week. I'd love to hype something up for you, but the cupboard is bare. The large banks are still more than two weeks out from kicking off the fourth-quarter reporting season and quite honestly, I can't wait. This is like watching paint dry.
Economics (All Times Eastern)
10:00 - Pending Home Sales (Nov): Expecting 0.9% m/m, Last 1.9% m/m.
10:30 - Dallas Fed Manufacturing Index (Dec): Expecting -2.5, Last -10.4.
10:30 - Oil Inventories (Weekly, Dec 19): Last -1.274M.
10:30 - Gasoline Stocks (Weekly, Dec 19): Last +4.808M.
12:00 - Natural Gas Inventories (Weekly, Dec 19): Last -167B cf.
The Fed (All Times Eastern)
No public appearances scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
No significant quarterly earnings scheduled.
At the time of publication, Guilfoyle was long NVDA equity.
