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It’s official, the first 2025 stock market barometers are in the books:
- The Santa Claus rally (SCR = last 5 days of old and first 2 days of new year): -0.5%
- The first 5 days of January (F5D): +0.6%

Statistically, the Santa Claus Rally happens 75% of the time and is 66% accurate as barometer. The F5D are up 64% of the time and accurate 66% of the time as a barometer. One more barometer, the entire month of January, has yet to play out.
What does ‘stock market barometer’ mean? In short, as the barometer goes, so goes the year. So, if SCR is up, the entire year will be up 66% of the time.
Obviously, we are already dealing with two conflicting messages (SCR up, F5D down), but that’s not necessarily a bad thing.
We also had conflicting barometers last year, when the SCR and F5D were down, but January was up. The Profit Radar Report’s 2024 S&P 500 Forecast assessed that constellation as follows:
“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 (+26.3%, +26.3%, +7.1%).”
The 2024 S&P 500 returns rivaled those of the prior signal constellations, and as a composite barometer, it couldn't have been more accurate.
This year’s constellation (down SCR, up F5D) is already unique, it happened only 3 times before (shaded purple in the above table). By the end of the year, S&P 500 returns clocked in at +25.8%, -1.5%, -0.7%. The message is less clear than in prior years.
For those wanting to dive deeper into the year ahead barometers table, keep in mind the following:
- Numbers in red mean that the barometer was incorrect in forecasting the direction of the full year
- The accuracy ratio of each barometer is shown in the last row
- If someone claims a single barameter is right 80-90% of the time (as some do), it’s bogus analysis or cherry picking
Technical Analysis
Although chart patterns and Elliott Wave Theory have been a mess (that’s why I haven’t commented on them), the S&P 500 and Nasdaq-100 have responded beautifully to support and resistance levels.
As written in the December 29, 2024 Profit Radar Report, I expected the Nasdaq-100 will test trend channel support and the S&P 500 support around 5,760.
Both support levels were to have the potential to mark the end of the correction (see chart annotations).


Both indexes bounced from support, with yesterday’s rally being supported by 85% of NYSE-traded stocks, that’s a good thing.
However, I was surprised to the see the CBOE equity put/call ratio close at 0.41 yesterday, the lowest reading in over 1 1/2 years. Low readings are a sign of optimism and usually seen near highs. Such a reading after a 3-day bounce is curious to say the least.
Bottom line, the S&P 500 is still sandwiched in the exact zone outlined in the last Free Market Outlook and as long as it stays there it’s best to be patient. Breakouts are worth watching for sure.
Mag 7 Domination
Mega cap domination has been in the news for over 2 years, and was supposed to be bearish for the stock market. When mega cap domination was hyped up to become a bearish issue in Q1 2023, the S&P 500 was still trading around 4,000.
I’ve busted the myth of mega cap denomination being bearish many times (i.e. May 10, 2023 Profit Radar Report: “Mega tech domination is just one of many reasons that was supposed to sink stocks over the past half year, but none of them mattered. Why? Because the market was washed out at the bottom with bearish sentiment extremes. Historically, that’s where rallies start and keep going despite strong headwinds.").
Mega cop domination can be quantified, sliced & diced in many different ways. Here is yet another. Near the December S&P 500 all-time high, the S&P 500 traded more than 6% (as high as 11%) above its own 200-day SMA while less than 60% of S&P 500 components traded above their respective 200-day SMA.
This kind of ‘internal component weakness’ despite index strength is caused by heavily weighted mega cap stocks veneering over broader, internal weakness. It’s also only been seen after 2020.
The chart below highlights every time the S&P 500 traded >6% above its 200-day SMA with less than 60% of individual stocks above their own SMA.

There were some worriesome precedents, but past incidents were by no means a consistant sell signal, particularly long-term.
Analysts love the addage that the market can stay irrational longer than investors can stay solvent. Dubbing the market irrational implies it's doing something unusual, something against the historic norm, something never seen before. In reality though, they market is doing pretty much what objective analysis projected, they just failed to see it.
For objective, purely fact-based, out-of-the box analysis - the kind of research that makes you the best-informed investor you know - and to get access to my soon to be released 2025 S&P 500 Forecast, 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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