Here's the Deal with Markets - December 22, 2024

Economy: In Slowdown

Market Cycle: Bullish under Pressure

_{Week 51 of 52 for 2024: 98.1% of the way through 2024}

This Weeks Market Performance

Weeks like this are why we dedicate time to learning the craft of trading. They remind us how crucial it is to recognize the early signs of changing market conditions. The action we've seen recently is a clear example of why preparation matters.

The selling accelerated on Wednesday with news of the Fed’s decision to scale back the expected number of rate cuts in 2025 to two from three, while at the same time the D.O.G.E team was in the process of killing the initial bipartisan budget deal.

The question now is, was that event the washout needed for stocks to continue their uptrend, or is this merely a bounce in a longer term downtrend?

If it is simply a bounce, look for SPY to get stuffed around $578.50 - $600.00 and then break back below $580 quickly.

On the other hand, if SPY can get back above $600 and hold, then that might be it for the selling.

Head on a swivel.

Nothing wrong with simply watching on the sideline for an answer as well.

Market Performance remains on par with past Credit Cycles

This week’s developments have put the current Bull Market under pressure. We now face a critical question: will this retracement in prices evolve into something more significant? If it does, it would align with patterns seen during previous credit cycles, where multiple corrections often appeared in quicker succession than during the Expansion.

While opportunities remain in this market, they could shift rapidly. For those still honing their skills, this is a moment best observed from the sidelines, as patience and learning go hand in hand during volatile times.

I learned this during the 2008 collapse as I was fortunate enough to have gone to cash in my trading account in August due to being too busy at work. Being on the sidelines the next several months allowed me to experience the moves without the emotion. Bringing about one of the best learning experiences of my life.

Look to the Dollar (DXY) and 10-year Gov Bond Yield for clues.

On the macroeconomic front, the dollar has broken out of its trading range and seems poised for further gains.

Simultaneously, the 10-year Treasury yield has climbed back above 4.5%.

Both of these developments lean bearish for stocks, creating additional headwinds for the market.

The next step is to see if these moves hold. If the dollar and yields stick this move higher, the market correction more than likely deepens, potentially marking the end of the current Bull Market. On the other hand, if these breakouts in the dollar and yields fail and reverse back into their ranges, look for stocks to resume their upward trend, extending this Bull Market further.

Stay Nimble and Open-minded

At this juncture, the market still warrants a presumption of innocence. Albeit, now with a healthy dose of skepticism. It’s a time for keeping an open mind and staying nimble. Both scenarios—a continuation of the Bull Market or a deeper correction—are plausible, so flexibility will be key in navigating what comes next.

Should the Bull Market resume, watch for a rotation in relative strength in the sectors. It could offer another hint of what’s to come in the coming months.

The Week Ahead

Economic Data to watch:

Update to last week’s WTF of the Week

Hawk Tua herself, Haliey Welch, broke her two week silence since the alt-coin named after her rugged pulled her followers.

Gotta say, not bad. This is a great response if someone was an unwilling participant in the fraud.

Better late than never, I guess.

Will be interesting to see how this one plays out in court or with a settlement in the future.

A lot of lessons with this one.

WTF of the Week

There’s a ton going on in this image from the arraignment for Brian Thompson’s murder. So much so that I had to double check and make sure it wasn’t A.I. Sadly, it is not.

Quote of the Week

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