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The last free Market Outlook (December 20, 2024) concluded with this nutshell summary:

“S&P 500 support is around 5,870 - 5,830. The S&P 500 - and especially Dow Jones Industrial Average (down 10 straight days) - are over-sold. The odds of a bounce are good. However, if support at 5,870 - 5,830 fails, I would not fight the downward pressure as long as price stays below 5,870 - 5,830.”

This assessment is still valid.

As anticipated, the S&P bounced from support at 5,830 and was rejected by resistance at 6,050 (the December 25, 2024 Profit Radar Report warned: “If the S&P is going to turn back down, it will likely do so around 6,050.”) and is now back to testing support at 5,870 - 5,830 again.

Don’t Sweat the Failed Santa Rally

Unless the S&P ends today (Friday) with a 1.77% gain, the Santa Claus Rally (SCR) will have failed.

Should we worry about the old addage: If Santa Claus should fail to call, bears may come to Broad and Wall?

Statistically, the SCR rally occurs 74.55% of the time. As a barometer (as SCR goes, so goes the following year), the SCR is accurate 66.67% of the time.

And, by the way, last year’s SCR delivered a 1% loss and yet the S&P 500 ended the year with a 23.31% gain. So, don't sweat the failed SCR just yet.

There are two other barometers I keep stats on: The First 5 Days of January and the Full January Barometer. Last year, the First 5 days ended with a 0.13% loss while January finished with a 1.59% gain.

The Profit Radar Report's 2024 S&P 500 Forecast observed back then: “For only the fourth time (since 1970), the Santa Claus Rally (SCR) and First 5 Days of January (F5) were down while the January Barometer (JB) was up. The 3 prior times (1985, 1991, 1993), the S&P 500 ended the year with a gain.”

True to form, 2025 ended with a gain as well. In fact, the year-end gain was higher than I expected. My S&P 500 projection (see below, published in the 2024 S&P 500 Forecast) pegged the S&P 500 to end 2024 around 5,400. 

Wall Street's S&P 500 forecasts pegged the S&P to end 2024 between 4,200 (JPMorgan) and 5,100 (Deutsche Bank). Most others had year-end targets in between 4,200 and 5,100 with an average of 4,861. 

Although my 5,400 year-end target was significantly more bullish than Wall Street analyst projections, it was not bullish enough. 

2024 - Different … but Similar

2024 was unique for many reason, and yet we didn’t see anything - chartwise - that hasn’t happened before.

The chart below plots the S&P 500 performance of 2024 (red graph) against the 9 most closely correlated 1-year price patterns. Each of those 9 patterns has a correlation of at least 97%.

What's the point of looking at recurring patterns? It shows that human nature, collective investors' reaction to various factors, does not change much. 

If the behavior remains similar, we can learn from past instances. Yes, the real reason I identify similar patterns is to see how the S&P 500 reacted to similar prices patterns and discern if a common theme (forward performance) develops.

S&P 500 performance following each of the 8 prior correlation signal dates along with a forward returns tracker will be just one of many analytical tools featured in the 2025 S&P 500 Forecast.

'New Age Dow Theory' Warning Signal

Dow Theory is considered the oldest indicator on Wall Street (dating back to the 1950s). According to Dow Theory, divergences between the Dow Jones Industrial (DJIA) and Dow Jones Transportation Average (DJTA) can spell trouble (i.e. lagging DJTA may indicate falling demand for goods).

Mobility and transportation have been revolutionized by semiconductors. That’s why many consider the Semiconductor Index to be the transportation stocks of the 21st century.

The PHLX Semiconductor Index (SOX) quietly peaked back in July and - for the first time in over 2 1/2 years - suffered a ‘death cross.’

Is this a warning signal for stocks?

This article looks at the 8 other times this happened and how the S&P 500 reacted to the semiconductor death cross. >> Read: S&P 500: Millennials’ Version of Oldest Indicator Triggers Warning Signal

For access to the 2025 S&P 500 Forecast - packed with objective, purely fact-based, out-of-the box analysis - and to become the best-informed investor you know, check out the Profit Radar Report. 

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

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