Despite the mid-week turbulence and holiday trading last week, stocks managed to squeeze out a modest gain. However, there are some interesting details to note in last week’s market activity. First, the bullish news – the Nasdaq outperformed the other indices (S&P 500 and Dow), which is typically a strong sign. However, interestingly, the top-performing sector last week was energy. Does this spell trouble for the market, or is it merely another rotation? Is the Goldilocks Setup in Peril? A few weeks ago, Don and I discussed the setup for a Goldilocks economy in 2025. This scenario centers around lower energy prices and lower interest rates for most of next year. Currently, I view this energy rally as a one-off anomaly. We’re seeing natural gas prices surge in anticipation of a cold freeze expected to hit the heartland of the United States in a couple of weeks. To be clear

With less than 3 full trading days remaining in 2024, we’re entering the final countdown of what has been a memorable year for markets. You might be thinking, “Shouldn’t it be the twelve days of Christmas?” While that’s true for the holiday tradition, the market has its own special seven-day period. What Is the Santa Claus Rally? The Santa Claus Rally refers to a specific seasonal phenomenon in financial markets that occurs over seven trading days: The last five trading days of December The first two trading days of January The Numbers Behind the Rally Historical performance since 1950: S&P 500 average return: ~1.3% Success rate: 78-80% positive returns Dow Jones Industrial Average: Similar gains of ~1.38% Why Does It Happen? Yale Hirsch first documented this pattern, which is typically driven by several factors: Holiday season optimism Year-end portfolio adjustments (“window dressing”) Tax-related selling and subsequent reinvestment Bonus-driven investing Lower

Last week’s selloff left chronic market-chasers with a big lump of coal before the holidays. But as I’m about to show you, there is plenty of reason to be optimistic going into the “Santa Claus Rally” period that starts this week. Not only am I pleased that the market’s consensus is no longer bullish, but there’s actually been some improvement internally in terms of relative strength. Here’s what I mean… The Bread and Circus of the Markets Every sector in the S&P 500 finished lower last week. While this may scare your average trader or investor, I don’t think you fall into that category if you’re reading this blog. Whenever the market drops, it gives us the opportunity to look at what sectors are holding up best, and more importantly, stocks within those sectors that are holding up even better. This concept is going to tie into my launch of

What a week it’s been! Volatility came back into the picture after the Fed cut rates and Fed Chair Powell exclaimed that there is a concern about inflation over at the Eccles Building. But let’s be real here: When is the Fed ever right about anything? I wish I could confidently say that the central bank is playing “4-D chess,” and that they’re crafting the illusion that inflation is a probability so that they can “surprise” the markets with more rate cuts next year. But here’s the thing: I don’t think the Fed is all-so-powerful. I think they listen to the market a lot more than people give them credit for.  I want you to have a look at this energy setup that I think will save the Fed going into 2025, and allow them to cut rates more than currently expected. The Bigger the Top, the Bigger the Drop

The performance of stocks at the index level may be causing concern for some market participants, and understandably so. The Dow has sold off for eight days in a row, which is enough to raise the eyebrows of the market’s trend-followers. But last week saw the Nasdaq continue its surge to new all-time highs again. And those that keep up with how I read the tape know that this is something I love to see – the Nasdaq leading to the upside. So, while I’m not discounting a bit of churn near the all-time highs in stocks, I’m still content with what I’m seeing under the surface of the indices.  Check out these new sector performance rankings… The Bread and Circus of the Markets Those that keep up with the Sector Leader Bullseye report have been fully aware about how communications (XLC) have been dominating the tape over the past

Back in late October, I went public with my overweight position in Tesla. Those that have been trading with me here at TheoTrade know that I like to call it “backing up the truck” when I take on a bigger-than-usual position in a stock. The thing is, now the stock looks so good I might have to say “park the truck.”  I made my initial buy on TSLA back on September 12 at $229.45 live in the TheoTrade chat room. A strong earnings report followed several weeks later on October 23, which led to even more gains for the ticker. . The stock is now trading at new all-time highs, so I wanted to take a moment to recap the trade and update you on what could come next in this market-moving name…  Original Price Target Achieved – What’s Next? I’m going to share my updated analysis on Tesla with

If you tune into the mainstream financial news, you’re probably hearing a mixed bag of reports when it comes to the state of the consumer. Some will proclaim that everything is awesome, while others say a Great Depression is imminent. I would take it a step further and say the doom and gloom is even worse online. When reading these types of reports, be sure to ask yourself ‘qui bono?’ or, “who benefits?” The thing with economic data is that it can be manipulated to suit virtually anyone’s desired narrative. It’s why I prefer to focus on the only metric that pays – price. And after last week’s performance, I think you’ll be intrigued as to the new performance rankings amongst the sectors… Just Accept It: The Market Knows Best If you catch my daily sessions here at TheoTrade, you hear me talk about how time is more important than

If you were around for my live session here at TheoTrade on Thursday, you heard me discuss how the U.S. has grown to account for nearly 65% of the value of the global stock market. Emerging and international markets have been left behind in the dust, and with the U.S. dollar reasserting its dominance as the world reserve currency, prospects for investing abroad are still looking dim. The big question now is whether this is a major contrarian signal to start looking abroad for opportunities. But if not, perhaps we need to re-engineer the way we think about markets to discover the new economic frontier.  Here’s what I mean… The New Economic Era Goes Deeper Than You Think Many of you have been asking me for updates on the Trinity Trade. Rest assured that I haven’t forgotten about you, and in just a couple short weeks, I’ll have a major

It truly is the most wonderful time of the year, not only because of the holiday spirit, but because of the sector leadership movements. Last week saw the real estate sector surge and capture the one-week leader position. I don’t think it’s just because people were home for the holidays, either. Instead, I think it’s a sign that we are heading into a speculative bubble in 2025 – quite possibly one for the record books.  Check this out… Rates Will Revamp Real Estate The recent developments in the tale of the tape offer a good reminder that everything in markets is connected. I like to call it the Principle of Interconnectivity, and it extends well beyond just what’s happening in stocks. In this case, I’m referring to the recent rally in the bond market. I’ve been very vocal in Theo chat about how I’m expecting interest rates, specifically on the

Over the past few weeks, we’ve seen a nice bounce in so-called “inflationary” sectors. Basic materials (XLB) emerged as last week’s leader, and over the past month, the top-performer is energy (XLE). But if you’ve been tuning into TheoTrade’s live sessions, you’ve heard me talking about crude oil’s imminent collapse. And finally, I think we have another catalyst for this move to begin. Check this out… Drill Baby, Drill The incoming Trump administration’s cabinet is now complete, and when it comes to the inflationary conundrum, there are two individuals that I’m watching closely. The first is Chris Wright, who was tapped to head the Department of Energy, and the second is Scott Bessent, who is set to lead the Department of Treasury. To sum up the policies of these two individuals – the plan is to grow our way out of any economic crisis or conundrum. The oil wells are