Our Lean

The PitBull said it again last night — that after December 15th (or mid-month) is when the markets typically start the year-end rally. But we still have this week to get through.

I had a feeling there could be some selling going into Tuesday’s Fed rate decision, and we could see more of that today.

The yield on the 10-year note has increased from a November low of 3.97% to 4.14% on December 5. Bond futures (ZBH26) made a high at 117.31 on 11/25 and a low at 114.27 yesterday, and have been down in 5 of the last 7 sessions, with one of the up days only gaining 4 ticks. Not exactly a ringing endorsement for further rate cuts — despite the market leaning toward 2 to 3 more cuts in 2026.

Our lean: If the Fed turns hawkish, we could see a 1% to 2% drop. If the Fed is dovish, the ES will likely go back to 6900 or higher — fast.

I don’t think the rally is over, but yesterday’s price action before the $NVDA news was weak. I expect another very volatile session, which I think could see some further weakness.

@HandelStats Study: Day 1 of the Fed’s Two-Day Meeting

December 9th Market Performance: 1980–Present

A study of S&P 500 daily performance since 1980 shows that December 9th has been a slightly bearish day overall.

Historical Stats (1980–2024):

While the edge is modest, the day has leaned slightly negative over the past four decades.

A Stronger Signal: When December 9th Falls on a Tuesday

The most striking pattern emerges when we isolate only those years in which December 9th landed on a Tuesday.

Across all such occurrences since 1980:

In other words:

Every single December 9th that fell on a Tuesday was a down day.

That’s a small sample, but a perfect historical streak is worth noting, especially when combined with broader seasonal tendencies.

FOMC preview – Published Dec. 5

At the conclusion of next week’s FOMC meeting, we expect that the Committee
will lower the target range for the fed funds rate by 25bp to 3.50-3.75%. We look
for at least two dissents in favor of no action and one in favor of a larger cut. The
interest rate forecast “dots” will also reflect unease about cutting, as we expect only
a slim majority of the nineteen Committee participants will have penciled in next
week’s cut as an appropriate action. As was the case in September, we think the
median participant will pencil in one more cut in each of the next two years.
Likewise, we don’t see reason to look for large changes to the economic forecasts.
We look for the forward guidance in the statement to reference “the extent and
timing” of additional adjustments, a subtle shift to indicate a cut is less likely at
subsequent meetings. At the press conference, we expect that Powell will stress
that with policy rates close to neutral, the time for risk management cuts is past and
that further cuts would only come with a material deterioration in the labor market.
With markets only pricing in a roughly one-in-three chance of a cut at the January
meeting, Powell will not have to use the same trenchant language used in October
to push back against market expectations.

Next week there are almost equally compelling reasons to cut and to hold. In such
instances, it comes down to vote counting. Most governors appear to favor cutting,
and most reserve bank presidents appear to favor holding. The most decisive news
to tilt the balance was NY Fed President Williams’ remarks two weeks ago that
there is room for another cut “in the near term.” We believe he was speaking for
the rest of the leadership (Powell and Jefferson), and this should weigh the votes
firmly toward a cut. We expect Musalem will join Schmid in dissenting against in
favor of holding. If they had their druthers, we think Collins and Goolsbee would
not cut next week either, though we guess they aren’t so firmly opposed as to cast
a dissent. Miran seems likely to dissent again for a 50bp cut.

Given that next week’s move is a close call, there is a widely held view that it will
be a “hawkish cut.” We generally agree with this view. One way this could be
conveyed would be for the statement to mimic last year’s forward guidance. Last
November’s statement referenced “In considering additional adjustments…”
which was followed by a cut in December. The December statement referenced “In
considering the extent and timing of additional adjustments…” which was
followed by a pause at the January ’25 meeting. By mirroring that change in
language, the Committee could hint at a pause in the coming January meeting. We
don’t see any other material changes in the statement language. At the press
conference, we think Powell will characterize policy as close to neutral. We don’t
expect him to comment directly on January, but instead to highlight that there is a
lot of data to be released between now and the January meeting and that will guide
their decision.

For the economic projections, we think the GDP projections for this year will be
revised up two tenths to 1.8%, and the core PCE will be revised down three tenths
to 2.8%, with no change in the unemployment rate projection. We don’t look for
major changes to GDP or unemployment in the out years, while core PCE could
be revised down a tick or two. In the dots for this year, we see at least seven and
potentially nine participants penciling in no cut for next week’s meeting.

Looking further afield, with little change in the economic outlook, we see the median dot continuing to point to one cut in ’26 followed by a final cut in ’27. We think we could see the median longer run dot move up from 3.0% to 3.125% (though admittedly we expected that in September whereas they left it unchanged).

We’re not looking for significant balance sheet announcements. If the desk needs to conduct open market operations around year-end, the implementation note from the recent meetings is flexible enough to permit policy to respond to market developments.

Guest Post: Tom Incorvia – Blue Tree Strategies

Since November 26, the SPY has remained in a narrow consolidation band, with price action showing limited directional conviction. Such tight ranges typically reflect market indecision regarding the next potential swing move. From an analytical standpoint, a decisive break outside this consolidation zone is needed to establish directional clarity. Until then, market participants face a choice between exercising patience or applying short-duration, mean-reversion strategies within the range.

Friday’s session briefly improved the outlook, with trading sustained above the long-term balance area. However, Monday’s subsequent rejection of those higher levels diminished that constructive signal. The low-volume area near 676 remains a critical reference point. Maintaining trade above this zone would preserve the current balance structure, while a breakdown below it would increase the probability of a move toward the 660 region.

Tom Incorvia began his career in financial services in 1987 and has amassed over three decades of experience navigating the complexities of the markets. His career spans both the buy-side and sell-side of the trading desks, having served as Vice President of Equity Trading and later as General Partner of a hedge fund. This dual perspective has provided him with a unique and well-rounded understanding of market behavior.

You can purchase Tom’s Course on Volume Profile here.

ES & NQ Levels (Premium only)

ES – Z Levels

The bull/bear line for ES is at 6859.25. ES is trading near 6860.50, holding just above this key pivot. Staying above 6859.25 keeps a short-term bullish tone; losing it shifts momentum back to sellers.

The upper range target is 6894.50. If ES can firm above 6883.00 and push through 6894.50, upside extension toward 6927.50 becomes likely.

The lower range target is 6824.00. A break back below 6859.25 opens the door to 6855.25, then 6835.25, and into 6824.00. Losing 6824.00 exposes 6791.00.

Overall: Holding above 6859.25 favors rotation back toward 6894.50. Failure under 6859.25 puts sellers in control with 6824.00 as the main downside magnet.

NQ – Z – Levels

The bull/bear line for the NQ is at 25,683.50. Price is currently trading just below at 25,669.50, signaling early-session weakness. A sustained move back above 25,683.50 is needed to shift intraday momentum upward.

If price fails to reclaim the bull/bear line, downside pressure favors a move into the lower range target at 25,498. Additional support sits at 25,664, then 25,564.75. A break under these zones opens the path toward 25,323.25.

If buyers regain control above 25,683.50, resistance comes in at 25,750 and then the upper range target at 25,869. Above that, the next resistance level is 26,043.

Overall, below 25,683.50 keeps the tone defensive, while reclaiming it invites a test of the upper areas.

Polaris Trading Group Summary – Monday, December 8, 2025

The trading day opened with cautious optimism but quickly turned into a grind marked by indecision, choppy action, and persistent bearish pressure. Despite early hopes for increased volatility and range expansion, Monday unfolded as a day of patience, selectivity, and important lessons.

Morning Session: Choppy Start, Caution Advised

Lesson: Both Manny and David stressed caution on Mondays — never go full size early, avoid “attacking” the open, and let the market settle. This mindset helped keep traders defensive and protected from early whipsaws.

Midday: Bear Pressure Intensifies

Lesson: Respect key zones. The confluence of multiple technical levels around 6835 created a magnet for price action. When bulls failed to reclaim broken support, the door opened for deeper value shifts lower.

Afternoon: News-Driven Bounce, Quickly Faded

Lesson: Stay tactical, not emotional. Manny’s patience and discipline to not force trades was a standout decision. The NVDA pop reminded everyone to be cautious with news-based volatility — traps can be swift.

End of Day: Bears Dominate, Bulls Absorb

Highlights & Takeaways

Market Mood Summary:

Solid read and adaptation by the room yesterday — with cautious, risk-aware trading prevailing over forced entries. Today’s setups will be clearer thanks to yesterday’s groundwork.