The Good (Year of Trading), The Bad (Advice We Got), The Ugly (MSTR)
I'm staking stock of my portfolio; Also, remember that advice about the Staples? And let's chart the market and see if the cradle will rock ...
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On Wednesday, ahead of the New Year's holiday, for the fourth consecutive session, equities sold off, only this time it was slightly different. For the first three sessions of this streak, last Friday through Tuesday, the pressure was less than moderate, the trading volume was less than light and we saw no technical damage. The Santa Claus Rally was in jeopardy, but really, nobody cared. The market had rallied sharply going into the Santa Rally period and it did make common sense that traders would take some profits.
Wednesday was different. No, the trading volume did not increase. Those investors and traders who appeared to have taken off for the holidays at the closing bell on Dec. 19 (a triple-witching day), still had not returned. Some of them will return today, others on Monday. The pressure on share prices was a little more severe on Wednesday than it had been. All of the U.S. mid-major to major equity indexes suffered beatings of between 0.63% to 1.25% with the semiconductors and small caps hit the hardest.
That said, Wednesday closed out another great year for equities. The S&P 500 posted a gain of more than 16% for the sixth year in the past seven and for the third year in a row. The Nasdaq Composite gained 20% in 2025, reaching that pace of advance or greater for the sixth year in seven and third straight year.
Testing, 1,2,3...Testing, 1,2,3...
Almost all of our key equity indexes, despite not only light, but contracting aggregate trade, closed at or close to levels that would force a reaction this morning on Friday. Either the levels will crack, and the cradle will rock or we'll see a technical rally. At zero dark-thirty on Friday morning, it appears that futures markets have placed some bullish bets for the opening bells down at 11 Wall Street and up at Times Square.
This morning, the S&P 500 will react to a test of its 21-day exponential moving average that could provoke the swing trading crowd as day traders are challenged by a 12-day EMA (in the daily moving average convergence divergence) that threatens to land upon the 26-day EMA.
The Nasdaq Composite sliced right through its 21-day EMA and put the test to its 50-day Simple Moving Average at the close on Wednesday. This will likely force some kind of technical reaction by professional managers as a group. They will likely have to choose between defending this level or retreating to the 200-day line, which would be a nasty haircut from here.
The daily MACD is also under some pressure. Not only did the 12-day EMA move slightly below the 26-day EMA on Friday, but the 9-day EMA moved just below the zero-bound. This will certainly provoke a reaction, not just by the swing crowd, but by day-traders as well. Again, foreign and futures traders are betting on a green opening as the creatures of the night hunt their prey.
Small caps are in a tougher spot than are the other key indexes as we enter the new year. Readers will note that the Russell 2000 came out of a failed cup with handle pattern in December, which is bearish, but went right into a falling wedge pattern. While the pattern still looks incomplete at this time, that would ultimately be bullish.
That said, this index is also testing its 50-day simple moving average, which could provoke some bullish activity this morning by professional managers, but there are some problems here for shorter-term traders. We'll have to see how this crowd reacts to a daily MACD that went bearish in posture nearly a week ago and a reading for relative strength that has fallen below what we consider to be "neutral."
Full Year Equity Index Performance...
- The S&P 500 gave back 0.74% on Wednesday, but gained 16.39% for 2025.
- The Nasdaq Composite lost 0.76% on Wednesday day, but added 20.36% for 2025.
- The Nasdaq 100 lost 0.84% on Wednesday, but gained 20.17% for 2025.
- The Russell 2000 surrendered 0.75% on Wednesday, but gained 11.29% for 2025.
- The S&P Small Cap 600 backed up 1.25% on Wednesday, adding just 4.23% for 2025.
- The S&P Midcap 400 gave up 1.05% on Wednesday, gaining just 5.9% over 2025.
- The Dow Transports lost 0.65% on Wednesday, tacking on 9.19% for 2025.
- The Philly Semis gave up 1.2% on Wednesday, but still soared 42.23% for 2025.
- The KBW Bank Index lost 0.83% on Wednesday, but added a whopping 28.8% for 2025.
Full Year S&P Sector SPDR ETF Performance....
On Wednesday, all 11 S&P sector SPDRs closed in the red, but no single fund among them gave back even one full percentage point. Defensives outperformed cyclicals. Nobody cares. This morning, full year fund performance for calendar year 2025 is what matters. All eleven of these funds closed out the full year in the green.
- Technology (XLK) gained 24.61% for 2025.
- Communication Services (XLC) gained 23.08% for 2025.
- Industrials (XLI) gained 19.35% for 2025.
- Utilities (XLU) gained 16.02% for 2025.
- Financials (XLF) gained 14.9% for 2025.
- Health Care (XLV) gained 14.5% for 2025.
- Materials (XLB) gained 9.94% for 2025.
- Energy (XLE) gained 7.88% for 2025.
- Consumer Discretionaries (XLY) gained 7.37% for 2025.
- Real Estate (XLRE) gained 2.63% for 2025.
- Consumer Staples (XLP) gained 1.52% for 2025.
Remember all of those pundits on the financial news networks telling you to load up on the staples for most of the year? I do. They are friends, so I won't name names, but come on, Fin TV networks, talk about past performance when interviewing these "regulars" and ask them questions. Conversely, mention it when those of us appear on your shows (I'm going to sound arrogant here) who would have to take the time to look up the last year that we did not outperform the broader marketplace.
Without sounding like a putz (OK, I sound like a putz), I honestly don't remember a year that I lost to the S&P 500. Sure, 2014 was a bad year. I sort of blew up my portfolio that year and the S&P 500 was up that year. I know I had a down year in 2022, but I still beat the market quite decisively. For this year, the all-equity Sarge-folio, in aggregate with my other portfolios, gained 28.57% for 2025, and up 68.8% after "Liberation Day." The S&P 500 was up 16.39% for 2025 and up 41.57% post its April low. The bond and alternatives portfolio, which I oversee, but do not manage on a day-to-day basis, was up 14.49%. The Core U.S. Bond Index was up 7.3%.
Yes, a great year, but then again, as readers know, I have been overtly tech-centric for not just this year but for three years. That's an allocation decision that increases risk, while enhancing the prospects for reward. For 2025, the Dow Jones U.S. Semiconductor index gained 48.83%. Leadership came from Micron Technology (MU) , +240.24% (long most of the year), Lam Research (LRCX) , +139.16% (long most of the year), KLA Corp (KLAC) , Intel (INTC) , +84.04% (long the second half of the year) and Advanced Micro Devices (AMD) , +77.3%, long the entire year.
The Dow Jones U.S. Software Index only gained 9.25% for the year, but that performance was led by our stock of the year for 2025, Palantir Technologies (PLTR) , which we were long all year and gained 135.03%. Notably, Strategy (MSTR) , which we did not touch and probably should not still be lumped in with the software industry, weighed on this index closing at -47.14% for 2025. It also helped having both paper and physical gold and silver in the alternatives portfolio all year. Gold rallied 64% in 2025, while silver ran 141%.
Heads Up!
I told you earlier this week. Just a reminder. Both Nvidia (NVDA) CEO Jensen Huang and Advanced Micro Devices CEO Lisa Su will speak from the CES 2026 kick-off event on Monday. I don't know if that impacts trade in those stocks today, but it would not surprise.
Economics
(All Times Eastern)
09:45 - S&P Global Manufacturing PMI (Dec-F): Flashed 51.8.
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 INTC, AMD, PLTR, NVDA equity.
