Welcome to the trading week of January 27th! S&P 500 slides on Friday as rally pauses, but stocks notch back-to-back weekly gains The S&P 500 closed lower after hitting new records on Friday, as investors took some profit to end a solid week centered on President Donald Trump’s return to the White House. The benchmark index shed 0.3% to 6,101.24, reversing course after hitting a fresh intraday record earlier in the session. The Nasdaq Composite slipped 0.5% to 19,954.30. The Dow Jones Industrial Average dropped 140.82 points, or 0.3%, to 44,424.25. Friday’s losses snapped a four-day winning streak for the three major indexes. Some megacap tech stocks that helped drive the market to all-time highs pulled back in the session, putting downward pressure on equities. Nvidia slid more than 3%, while Tesla fell more than 1%. Despite Friday’s retreat, excitement toward Trump’s pro-business policies has largely pushed risk assets higher this week as investors focused on his inauguration. Traders were also relieved that there have only been threats on the tariff front from Trump — instead of formal action — during his first few days in the White House. All three major averages posted their second straight positive weeks, signaling that the bull market is back in full force after December’s pullback. The S&P 500 and Nasdaq each rose around 1.7% this week, while the Dow climbed 2.2%. In addition to hitting fresh intraday records this week, the S&P 500 also notched a new all-time closing high on Thursday. Notably, Trump said on Thursday that he would “demand that interest rates drop immediately” when addressing world leaders in Davos, Switzerland. The president also said he would ask Saudi Arabia and other OPEC nations to lower the price of oil. “So far, markets have reacted to every statement made by the President, even those that should not have any impact,” said Mark Malek, chief investment officer at Siebert. “This shows that traders have not yet settled into their pace.” Beyond politics, market participants kept an eye on corporate news and earnings reports. Novo Nordisk rallied more than 8% following positive early-stage results for a weight-loss drug. Texas Instruments, on the other hand, slid more than 7% on weak earnings guidance. This action comes ahead of a busy week, when attention will turn to big technology earnings and the Federal Reserve meeting. Fed funds futures are pricing in a more than 99% chance that the central bank leaves interest rates unchanged, according to CMEGroup’s FedWatch tool. This past week saw the following moves in the S&P: S&P Sectors End of Week: Major Indices End of Week: Major Futures Markets End of Week: Economic Calendar for the Week Ahead: (T.B.A.) What to Watch in the Week Ahead: (N/A.)
2021-2024 Textbook 4-Year Cycle in The Books With a 2021-2024 textbook 4-Year Cycle in the books I’ve reset the cycle to track 2025-2028. The traditional first-year slump hasn’t materialized since Ronald Reagan’s reelection in 1984. This may be attributable to some compression of the cycle where first years have become like third years – a sort of midterm pre-election year. Midterm elections have become more important as incumbent presidents try to hang on to the slim congressional margins we’ve seen in recent years. Q1 of post-election years and Q2-Q3 of midterm years have been notable weak spots with the sweet spot of the cycle running from Q4 midterm year to Q2 pre-election year. Some Good News for the Bulls “I am an optimist because I don’t see the point in being anything else.” Abraham Lincoln What a start to 2025, nearly picking up where 2024 left off. Yes, stocks fell in December and during the historically bullish Santa Claus Rally period, but the S&P 500 just made another new all-time high and is up nearly 4% in January already. Here are two bits of good news for the bulls as we all freeze across this great country. The First Five Days Were Positive Although you wouldn’t expect there to be much correlation here, the first five days of a new year can sometimes foreshadow how the rest of the year might go. Since 1950, the first five days were in the green 48 times and the full year was higher 81.3% of the time and up 14.2% on average, both better than the average year gain of 9.5% and up 72.0% of the time. Digging in a little bit more, a negative first five days suggests virtually a flat year on average and higher only 55.6% of the time. This matters, as the first five days in 2025 were up 0.62%, suggesting some potential good news for the bulls. Post-Election Years Have Been Strong Lately Did you hear we had an election last year? That of course means this is a post-election year, a year that historically has just been kind of average. As you can see below, since 1950, most of the big gains took place in pre-election years, while midterms years could be trouble. So this means election and post-election years tended to be more along an average type of year. Here’s where things get interesting though. In more recent times, post-election years have been very strong. Going back 40 years (to 1985) post-election years have gained more than 18% on average and have been higher nine out of ten times! Here we broke it down by all post-election years going all the way back to 1897 and as you can see, only Bush in 2001 saw a negative return during this year in the cycle in more recent times. To put a bow on this discussion, here are the returns for the four-year Presidential cycle since 1950 compared with the past 10 cycles. Post-election years are far and away the best performing year more recently. What about taking the extra step and breaking it down by whether there was a new president versus a president in their second term? Here we found that stocks once again do much better in post-election years under a second term president, yet another positive for 2025. Post-Election Best Year Since 1985 Bullish For 2025 We might be tempted by the post-election year’s notorious history as the worst year of the four-year cycle going back to the end of our database in 1833, the fifth year of Andrew Jackson’s presidency, to lean bearish for 2025. The full four-cycle “191-Year Saga” on page 132 shows that post-election years average a paltry 3.3% return over these past 48 election cycles and that many wars and bear markets have started in a post-election year. But post-election years have improved since WWII and since 1985 DJIA averages a gain of 17.2% with eight up years and two down. This is the best average gain of the four-year cycle over this period, besting the pre-election year’s 15.2% average, though the pre-election year has nine wins and only one loss. The one-year seasonal chart here shows the S&P 500’s performance during post-election years since 1949 paints a rather bullish picture for 2025. At this juncture I expect the market to be up 8-12% for the year with pullbacks in Q1 and Q3. I am concerned about inflation, valuations and the older weak post-election patterns, we expect the bull market to continue through 2025, though it will likely be a much bumpier ride than it has been the last two years. Sentiment Swing Thu, Jan 23, 2025 The S&P 500 has continued to press higher in the past week including attempts to push up to new highs in the past couple of sessions. As a result, sentiment has taken a bullish turn and has done so in dramatic fashion. As shown below, the American Association of Individual Investors (AAII) survey has seen big swings in bullish sentiment over the past few weeks. Starting in early December, bullish sentiment fell six weeks in a row culminating with only a quarter of respondents reporting as bullish last week. In this week's survey, 43.4% of respondents reported as bullish. In a single week, that entirely erases the past month and a half's drop as bullishness has rebounded ot the highest level since December 5th. Former bulls had to go somewhere, and the recent decline in bullish sentiment resulted in bearish sentiment rising from a low of 30% at the start of December to a high of 40.6% last week. As for this week, bears fell back down below 30% for the first time since the week of November 14. Given those readings in bulls and bears, last week the bull-bear spread was negative (meaning there were more bears than bulls) to the widest extent since November 2023. The rapid turnaround in sentiment resulted in this spread rising back up to 14.0 per the latest data. As with bullish sentiment, that is the highest reading since early December. One thing to factor into this massive turnaround in sentiment is the S&P 500's return to record highs. As might be expected, historically sentiment leans much more bullish when the index is closer to a new high. In the chart below, we show the average reading in the bull-bear spread throughout the history of the survey dependent on how far the S&P 500 is trading below a 52-week high. As shown, the bull-bear spread has averaged dramatically more bullish readings when trading at 52-week highs and has likewise leaned positive only when the index was at least within a few percentage points of a new high; as is the case presently. That means the big swing towards bullishness is notable but maybe not exactly surprising with the S&P 500 returning to its highs. While the context of where the S&P 500 is trading versus previous highs is important, that shouldn't steal the thunder from just how big of a move sentiment had this week. The chart below shows the week-over-week change in the bull-bear spread over the past two decades. As shown, this latest 29.2 percentage point jump is the largest since November 2023, and prior to that, every other such large move higher came before 2010! Market Bounce After December Low Breach Encouraging DJIA closed below its December closing low (page 36 STA 2025) on Friday, January 10, 2025 for the 39th time since 1950. Historically, this event has been associated with further market weakness. And with the Santa Claus Rally (SCR) failing to materialize this year our seasonal indicator antennae have been twitching. But S&P 500 did register a positive First Five Days (FFD) putting our January Indicator Trifecta at 1 for 2 so far with the full-month January Barometer (JB) holding the key. All three Trifecta components are based on the S&P 500 on a closing price basis. This week’s softer inflation readings from PPI and CPI removed some of the market’s fears that sticky inflation would cause the Fed to hike rates. The 10-Year yield may have peaked here in the near term at least as stocks had their biggest one-day rally since the day after the election. Stocks appear to have found support around the election breakout gap around S&P 500 5775. Reviewing the data associated with both the DJIA December Low indicator and the January Indicator Trifecta we found that there were only four other prior years that had a down Santa Claus Rally, a close below the prior DJIA December closing low and positive First Five Days and/or January Barometer: 1980 both FFD and JB up, S&P 25.8%, 1991 FFD down, JB up, S&P 26.3%, 1993 FFD down, JB up, S&P 7.1% and 1994 FFD and JB both up, S&P -1.5%. In the above chart of the 30 trading days before and the 60 trading days after DJIA closed below its December closing low we have split the previous 38 DJIA December low crossings into four groups along with 2025 as of yesterday’s close (January 15) for comparison. With just four occurrences, years like 2025 have been second best on average with 1994 the big drag. The best performance was observed by the years that had the smallest decline after DJIA closed below its December low. Years with greater than a 10% decline after the cross had the weakest performance. Most importantly, it appears the quicker DJIA recovers after crossing below its December low, the better its performance was. DJIA’s quick rebound this year off the December low crossing is encouraging. Using the same groupings to plot DJIA’s 1-year seasonal pattern we see nearly the same outcome. Full-year average performance is the best when one of the two remaining January Indicator Trifecta components is positive. Smaller declines and quick recoveries also lead to better full-year performance figures. Current readings are in line with our bullish forecast for 2025 with a base case of 8-12% and best case of 12-20%. The US: Nicest House on the Block Tue, Jan 21, 2025 President Trump's second term has officially begun. Since winning the election a little over two and a half months ago, the S&P 500 (SPY) has risen 5.42% through today. That's better than any of the other key country ETFs shown in the snapshot below. For the most part, these country ETFs have largely fallen since the US election with the two largest declines coming out of South Africa (EZA) and Brazil (EWZ). More broadly, emerging markets like these have significantly underperformed with an average decline of 8% versus only 1% for developed market countries. While most country ETFs have fallen since early November, in addition to the US, there are only four that are up on the year: Germany (EWG), Singapore (EWS), Canada (EWC), and France (EWQ). Canada's gains may come as somewhat of a surprise as the newly inaugurated administration has put the country at the center of tariff talks alongside the neighbor to the south, Mexico (EWW). We provided commentary on these topics in today's Morning Lineup. While EWC has risen, Mexico has been much weaker with a 6.5% decline since the election. Furthermore, Mexico (EWW) is currently the country ETF that's the farthest below its 52-week highs and closest to 52-week lows (3.71% away) of the ones shown. In the chart below, we show the relative strength lines of the country ETFs for Mexico (EWW) and Canada (EWC) versus the United States (SPY). As shown, the two ETFs have seen relative performance drop since the election as tariff tensions have become more of a reality, but that weakness is in the context of longer-term underperformance that has been persistent throughout the past year.
Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2024- S&P sectors for the past week-
Here are the current major indices pullback/correction levels from 52WK highs as of week ending 1.24.25- Here is also the pullback/correction levels from current prices Here are the current major indices rally levels from 52WK lows as of week ending 1.24.25-
Stock Market Analysis Video for January 24th, 2025 Video from AlphaTrends Brian Shannon (VIDEO NOT YET POSTED.) ShadowTrader Video Weekly 1/26/25 Video from ShadowTrader Peter Reznicek (VIDEO NOT YET POSTED.)
StockBoarders! Come join us on our stock market competitions for this upcoming trading week ahead!- ======================================================================================================== StockBoards Weekly Stock Picking Contest & SPX Sentiment Poll (1/27-1/31) <-- click there to cast your weekly market direction vote and stock picks for this coming week ahead! Daily SPX Sentiment Poll for Monday (1/27) <-- click there to cast your daily market direction vote for this coming Monday ahead! ======================================================================================================== It would be pretty sweet to see some of you join us and participate on these! I hope you all have a fantastic weekend ahead!
And finally here is the most anticipated earnings calendar for this upcoming trading week ahead- ($TSLA $SOFI $AAPL $META $MSFT $INTC $ASML $BA $SBUX $PGR $NUE $T $IBM $LRCX $HITI $UPS $GM $NOW $SAP $XOM $MA $LMT $V $CLS $RCL $CVX $ABBV $DOW $KLAC $TMUS $WOLF $RTX $LC $BX $BMRC $LUV $NOK $WM $WDC $CAT $ADP $ALGM $CNI $CMCSA $DHR $LEVI $ARE $CCS $CL $WHR) If you guys want to view the full earnings post please see this thread here- Most Anticipated Earnings Releases for the week beginning January 27th, 2025 <-- click there to view!
