on January 2, 2025

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December Declines Cap a Record-Breaking 2024: What’s Next for 2025?

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Our View

Too bad I didn’t follow my own advice about the markets going too far, too fast, and that something big was going to happen. The institutions rotated out right into the last trading day of the year. The ESH made its 6185.75 high on December 6 and dropped 234.5 points, or 3.8%, from its all-time high. The NQH hit its high on December 16 and fell 5.4%, or 1,217.75 points. Meanwhile, the YMH peaked on December 4th at 45,642 and settled Tuesday at 42,873—a 2,769 point change, or 6.07% decline all occurring in December.

Despite a record year for the stock market, there was no Santa Claus rally. However, the U.S. still had a great 2024, with the S&P 500 notching its best consecutive years since 1997 and 1998. The 10-year Treasury yield ended the year at 4.577%, having started 2024 below 4% and logging its largest annual rise since 2022. Bitcoin, trading below $94,000, more than doubled in price during 2024 and hit an all-time high of $108,309 in December.

Every bullish day in December has been sold. Will they sell the first trading day of 2025 as well?

Our Lean

The markets can run, but they can’t hide. When you consider the size of 2024’s gains, December was a tough month, but when you look at the other 11 months, it was a hell of a year. But 2025 will not be like 2023 or 2024. The Fed likely won’t be lowering rates with Trump’s tariffs causing problems with our trading partners, potentially pushing inflation higher. On top of that, geopolitical concerns—whether from Xi, Putin, or others—loom over Trump’s upcoming inauguration.

Our lean: If you haven’t been selling rallies, you’re not making money. They say, “As January goes, so goes the year.” Well, guess what? I don’t think this crazy rotational selling is over. While I can’t rule out mutual funds stepping in with some beginning-of-the-year buying, I believe rallies will continue to get sold, especially if inflation and yields keep climbing.

MiM and Daily Recap

The ES made an early Globex low of 5944 and traded within a 22-point range until around 4:00 AM, when it expanded upward to reach its high of the day at 5983.25 by 7:00 AM. Opening the regular session at 5972.50, it traded in a choppy range, cycling up to 5980.25 at 10:02 AM, dropping to 5954.75 at 10:10 AM, and rebounding to 5979.25 at 10:26 AM.

After breaking below the open, the market was destined to sell off on the last trading day of the year, taking out the overnight low and printing a session low of 5921.75 by 12:38 PM. A short-covering rally lifted prices to 5950.25 within 26 minutes, essentially defining the range for the remainder of the day, although it did make three slightly lower lows, eventually bottoming at 5917.25 by 2:42 PM.

A minor rally back into the range followed, with the ES trading at 5943.25 during the 3:50 PM MIM imbalance release, which showed -$400 million to sell. A bit of choppy action led to the cash close settlement at 5935.75, with the exchange close price at 5938.25, down 16 points (-0.27%). The NQ settled at 21,234.25, down 154 points (-0.72%).

In the end, I was planning to include this in Friday’s OP but didn’t. The S&P rarely behaves the way most people expect it to when they want it to, and this was a clear example of the Santa Claus rally. While it worked for years, it got bushwhacked by all the rebalancing after Trump won the election and the Fed overshot its targets.

In terms of the ES’s overall tone, it was another day of selling the rallies. As for the overall trade, volume remained steady right through to the end of the year, with 1.265 million contracts traded and NQh traded 47K contracts on the day.

Globex has a nice opening developing this morning. In the rooms we will be watching the Market On Open auction and the first hour of cash backed trading to see how the tone of the day is setup. Too many trapped shorts on a gap up could call for a gap and go.

How to read the MIM

Technical Edge

Fair Values for January 2, 2025

SP: 48.3
NQ: 194.64
Dow: 294.55

Daily Breadth Data 📊

NYSE Breadth: 62% Upside Volume
Nasdaq Breadth: 54% Upside Volume
Total Breadth: 55% Upside Volume
NYSE Advance/Decline: 63% Advances
Nasdaq Advance/Decline: 46% Advances
Total Advance/Decline: 53% Advances
NYSE New Highs/New Lows: 24 / 65
Nasdaq New Highs/New Lows: 72 / 95
NYSE TRIN: 1.02
Nasdaq TRIN: 0.71

Weekly Breadth Data 📈

NYSE Breadth: 54% Upside Volume
Nasdaq Breadth: 65% Upside Volume
Total Breadth: 62% Upside Volume
NYSE Advance/Decline: 50% Advances
Nasdaq Advance/Decline: 56% Advances
Total Advance/Decline: 54% Advances
NYSE New Highs/New Lows: 73 / 236
Nasdaq New Highs/New Lows: 205 / 302
NYSE TRIN: 0.84
Nasdaq TRIN: 0.67

HandelStats Monthly Data from 2024 for RUT, INDU, SPX, NDX – PDF Link

Guest Posts:

Dan @ GTC Traders

Oil and Bitcoin A few trades we have our eye on this week?

We begin with Oil, which usually sees seasonal strength from the beginning of the year, until mid-summer. However, it is not unusual to see some weakness in the first few weeks of January as Oil finds its footing. This coincides well with the fact that Oil has rallied a bit in the last few weeks but is a bit extended from its mean average price looking at the last 100 hours of price action ..

USO ETF – 1 Hour Chart

So while we are interested in developing a longer-term position in Oil? We are not interested in buying such a rotational high. So if we see any of that aforementioned seasonal weakness develop, perhaps on a simple technical mean-reversion? We’ll be stalking any low failure on such a mean-reversion as a chance to begin to develop a bullish position.

Whereas looking at a completely unrelated market?

We are also stalking Bitcoin for a short.

From November to the middle of December of 2024, we were bullish on Bitcoin prices. At the moment? But near the middle of December we turned neutral on price.

IBIT ETF – 1 Hour Chart

So at the present time, if price begins to move below the lows of December 30th in Bitcoin with good volume? We would consider this an opportunity to begin to develop a position in getting short. Or? For those who are less adventurous? As we mentioned in this article, we would consider it wise to either be flat with no position, or at least make sure any Crypto holdings are well hedged.

Until then? Stay safe … and trade well.

Trading Room News:

Polaris Trading Group Summary: Tuesday, December 31, 2024

Market Setup and Announcements:

Half-Day Session: The room operated until noon, with trading resuming on January 6, 2025, after the New Year break.
Market Context:
- Early targets identified and achieved for both @ES and @NQ:
  - @ES hit the 5960–5980 zone.
  - @NQ reached the 21461–21498 zone.
- The session was lighthearted, reflecting the final trading day of the year and an upbeat community mood.

Key Trades and Results:

Bullish Scenarios Played Out:
- Sustained bids above key levels for @ES and @NQ confirmed the strength of the market’s upward momentum.
- Emphasis on staying “long-lean” aligned with the positive market trajectory.
@CL Open Range Long: All targets were met, exemplifying well-planned execution and strategic entry points.

Community Engagement:

Room members exchanged New Year’s greetings, reflecting a strong sense of camaraderie.
David maintained a lighthearted tone, sharing images and humorous remarks, such as the “Elvis Has Left The Building” post marking the end of the session.

End-of-Session Notes:

David expressed gratitude to the PTG community and wished everyone a safe and prosperous 2025.
The session wrapped up with successful trades, a focus on strategic execution, and positive energy.

Takeaways:

Positive Trades: Both @ES and @NQ fulfilled their upper targets early, while @CL’s Open Range Long added another successful trade to the session.
Community Spirit: The room maintained a positive and engaging atmosphere, emphasizing collaboration and support.
Looking Ahead: PTG takes a well-deserved break, with trading set to resume in the new year.

Wishing the PTG community a profitable and exciting 2025!

DTG Room Preview – Thursday, January 2, 2025

Market Overview:
- S&P 500: The index has experienced two consecutive years of 20% gains, reminiscent of the late 1990s. However, 2025 may bring heightened volatility due to the Fed’s “higher for longer” rate stance, potential inflation resurgence, and new policies from the Trump administration, including high tariffs, corporate tax cuts, and immigration curbs, all seen as inflationary. The median S&P 500 target for year-end is 6,600, a 12% increase, with growth broadening beyond the “Magnificent Seven” to the rest of the index.
- China: Despite stimulus efforts from Beijing, weak manufacturing data and expectations of increased U.S. tariffs led to steep losses for China’s CSI 300 (-2.9%) and Hang Seng China Enterprises (-3.1%), marking the worst start-of-year trading day since 2016.
Key Risks:
- U.S. Debt Ceiling: With the suspension agreement expiring, Treasury Secretary Janet Yellen warns the government could hit its debt limit between January 14–23 unless action is taken. Speaker Mike Johnson proposed raising the limit by $1.5 trillion, paired with $2.5 trillion in spending cuts, which could prolong market uncertainty.
- Technical Levels for ES Futures: The ES remains in an intermediate-term uptrend, with support holding overnight. Key levels:
  - Resistance: 6074–6071, 6444–6449
  - Support: 5912–5925, 5828–5825
  - 50-day moving average sits at 6030.50 as loose resistance.
Today’s Economic Calendar:
- 8:30 AM ET: Unemployment Claims
- 9:45 AM ET: S&P Global Manufacturing PMI
- 10:00 AM ET: Construction Spending
- 11:00 AM ET: Crude Oil Inventories
Additional Notes:
- Volatility remains high during this holiday week, but overnight trading volume was too light to indicate whale bias.
- No corporate earnings of note today.
This summary highlights potential market catalysts, risks, and technical insights to guide traders through the day.

ES – Week over Week

We have cycled through since last week. Nice bounce so far this AM, waiting to see if it lasts past the open. Today there is a lot of resistance at the 6025 area that will attract the bulls. 5940 is the line for the bears to attack. We remain in a bearish trend until we pierce 6169.

NQ – Week over Week

NQ also had a pre-market bounce this AM. Bulls need to attack early and get above 21436 and then 21535. 21766 is a decent goal for the bulls. Bears need to keep it below 21535 and then drive below 21099.