It never ceases to amaze me – how sentiment follows price. Stocks dropped six weeks’ worth of gains from their all-time highs down into what appears to be a low of significance this past Monday. This was also the longest decline that stocks have experienced going back to the October 2023 low. Ask yourself this question: Was that a good time to be buying stocks? I’ll be honest with you: I think the permabears are in for a lot of pain in the coming weeks. It’s always very telling to me when I start seeing comparisons to “a collapse along the lines of the Great Depression.” It actually gave me this idea: Let’s run the math on how the market behaved during those Roaring Twenties.  I think you’ll be surprised. After all, the numbers never lie, only the anonymous social media permabears do. Check this out… (JUMP) The Numbers Behind

Stocks went out near the lows of the week on Friday, and by now, most of you are well aware of my high regard for closing prices. In other words, when stocks close at the lows of the week, it’s a strong signal that bears were the victor of that five-day period. Over the past month, we’ve seen two downtrodden sectors – energy and healthcare – emerge as leaders. But in the grand scheme of things, not much has changed when it comes to the bull market. In fact, it’s why I’m calling this pullback the “Bullish Correction…” A Healthy Rotation If I Ever Saw One As we finally begin the first full trading week of 2025, there are a couple of new names on our sector leader table. The year-to-date number is especially deceiving here, since we’re only a couple of weeks into the new year. But I would

It’s been a choppy few weeks in the stock market. From now looking back to the election in November, we’re basically unchanged. This in turn is prompting talking heads to declare the “Trump bump” is over. I’ll level with you:  My trading, and more importantly, my risk management, doesn’t change depending on who holds political power. If anything, this type of sentiment I’m seeing and hearing now leads me to believe the market chop is nearing its end. But much of it depends on this one very important sector reclaiming leadership in the stock market.  Check it out… The New Economic Era’s Microscopic “Gears” It’s no secret that the technology sector has been the main driver of this bull market over the past few years. But interestingly, in 2024, tech wasn’t even the top-performing sector. However, there’s a special sub-sector within the broader tech space that is critical to much

For the second week in a row, energy was the top-performing sector in the S&P 500. This is especially interesting because, given the strength of Friday’s rally, it looks like bears may be about to be squeezed again. Whenever energy outperforms, it gives us a clue as to where we are in the market cycle. But the bigger question is whether inflationary pressures are rising… or if the latest pop in energy was a last-gasp rally before a bigger drop back down. Let’s dive deeper into this tape for more clues about where the bull market stands…  Energy Is a Late-Cycle Leader I try to be intentional in all of my actions – not just in this trading business. The name of this newsletter – Sector Leader Bullseye – wasn’t chosen at random. Whenever we see certain sectors out- or underperforming, it tells a much deeper story surrounding the state

A new year is upon us, which means it’s finally safe to count all those chickens that hatched in 2024. Needless to say, it was a year for the record books. The S&P 500 finished 23.3% higher in 2024 – not bad – but our trading strategies were able to quadruple that performance using stocks alone, I’d add. We’re obviously in the market to make money, but it’s important to keep a healthy sense of detachment from it all. “The market giveth, and the market taketh,” as I like to say. When it comes to education, however, that can’t be taken away from you. And so, as we begin 2025, I wanted to share an amazing story from someone who’s been on for the ride since my early days here at TheoTrade…  Earn While You Learn Those that have been trading markets long enough know that it serves to make

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