December 26, 2025

The major averages closed the last full week of 2025 with the major averages higher. The S&P 500 and NYSE set new record highs during the period, and the 'Santa' rally arrived right on time. The short holiday week nudged equities higher on low volume that saw the market get a boost from better-than-expected economic data with Q3 GDP at +4.3% vs. +3.2% estimated and November Industrial Production up +0.2% vs. +0.1% consensus. Weekly Initial Jobless Claims showed a steady jobs market, down 10k. Yields ticked higher on the data with the rate on the two-year T-Bill briefly crossing back above 3.5% before finishing at 3.48%. The gains were across the board with every sector finishing in the green with Materials (XLB), Financial (XLF), Communication Services (XLC) and REITs (XLRE) outperforming, but every market group except Consumer Discretionary (XLY) and Consumer Staples (XLP) was up more than +1%. Gold, silver and copper continued on their torrid pace also setting new record highs as investors continued to diverse into a handful of safe assets. The S&P 500 and NASDAQ extended their weekly win streaks, while the DJIA was up for a second week over the last three. Next week is another short week as we head into the New Year but the major averages look poised for further gains as investors hope the Santa rally continues.

For the period, the DJIA gained 576.08 points (+1.2%) and settled at 48710.97. The S&P 500 added 95.44 points (+1.4%) and closed at 6929.94. The NASDAQ picked up 248.48 points (+1.2%) finishing at 23,593.10, while the small cap Russell 2000 tacked on 4.93 points (+0.2%) and settled at 2534.35.

Market Outlook: The technical condition of the market remains positive and slightly improved this week with the S&P 500 and NYSE striking new record highs.

The technical indicators for the different indexes nudged into positive ground with the MACD, a short-term trend gauge, displaying a bullish cross for the S&P 500 and NASDAQ and Momentum, as measured by the 14-day RSI, positive and improving. The different indexes are all trading above their respective 50-day MA which confirms the bullish trend. The seasonally strong period, known as the 'Santa' rally, didn't disappoint as equities finished the period with solid gains. While the Philadelphia Semiconductor Index (SOX) outperformed, the other secondary indexes barely eked out gains as the DJ Transportation Index worked off some of its overbought condition from its recent breakout, while the uptick in yields weighed on the small cap Russell 2000 finishing nearly flat. Finally, the VIX, Volatility Index, which measures how concerned traders are of possible weakness in the market, fell to its lowest level, 13.47, since December 2024. That indicates that market participants aren't expecting a soft market as we head towards the New Year, but it could be a sign of complacency as the stock market has been able to shake off tariffs, sanctions, crypto dips and more, with nothing more than small blips for months. The low VIX should keep investors buying the dips going forward.

A chart of these indicators can be found by going to the Market Edge Home page and clicking on Market Recap, which is on the right-hand side of the page just below the Second Opinion Status numbers.

Cyclical Trend Index (CTI): The underlying premise of the CTI is that the market, as measured by the Dow Jones Industrial Average (DJIA), tends to move in cycles that often resemble sine waves. There are five identifiable cycles, each with different time durations at work in the market at all times.

Currently, the CTI is Positive at +9, unchanged from the previous week. Cycles B, C and D are bullish, while Cycles and E are bearish. The CTI is projected to remain in a positive configuration through January.

Momentum Index (MI): The markets momentum is measured by comparing the strength or weakness of several broad market indexes to the DJIA. Readings of -4 and lower are regarded as bearish since it is an indication that a majority of the broader based market indexes are weaker than the DJIA on a percentage basis. Conversely, readings of +4 or higher are regarded as bullish.

The Momentum Index is Positive at +4, unchanged from the previous week. Breadth was positive at the NYSE as the Advance/Decline line gained 1366 units while the number of new 52-week highs exceeded the number of new lows on all four sessions. Breadth was mixed at the NASDAQ as the A/D line added 661 units while the number of new lows out did the new highs on each day. Finally, the percentage of stocks above their 50-day moving average rose to 58.4% vs. 54.2% the previous week, while those above their 200-day moving average increased to 66.1% vs. 66.0% prior. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Underlying market breadth was mixed this week with the NYSE Advance/Declines line, leading indicators of market direction, hitting a new high on Wednesday showing the majority of stocks are under accumulation and bodes well for the market going forward. Although new 52-week highs continue to outnumber the new lows on the NYSE, the new lows on the NASDAQ outdid the new highs for a second straight week. Two weeks ago, however, the NASDAQ put up the most new highs since the last week of October and this week they were almost even.

Sentiment Index (SI): Measuring the market's Bullish or Bearish sentiment is important when attempting to determine the market's future direction. Market Edge tracks thirteen technical indicators listed below that measure excessive bullish or bearish sentiment conditions prevalent in the market. The Sentiment Index is Negative at -5 unchanged from the previous week.

Investor sentiment remains bullish, but not all the market services released updated numbers this week. Of the services that did report, the American Association of Individual Investors (AAII) showed a step back in retail bulls to 37.4%, a tick below the historical average of 37.5%. The National Association of Active Investment Managers (NAAIM) Exposure Index shows the professionals remaining 'all in' but fell to 95.1% from 100.7% the prior week.

Market Posture: Based on the status of the Market Edge, market timing models, the 'Market Posture' is Bullish as of the week ending 11/28/2025 (DJIA - 47716.42). For a closer look at the technical indicators and studies that make up the market timing models, check out the tables located below.

Industry Group Rankings: What's Hot (6) - What's Not (24): The following are the strongest and weakest Industry Groups for the period ending 12/24/25. Strongest: Transportation, Healthcare Products, Metals & Mining and Integrated Oil & Gas. Weakest: Paper & Forest Products, Building Materials, Technology Services, and Wholesale. To review all the Industry Group rankings in the Market Edge universe, click on the Industry Group tab.

ETF Center: The top performing ETF categories for the week ending 12/24/25 were: Sector-Alternative Energy (+6.30%), Specialty Technology (+6.10%), Growth-Large Cap (+4.04%),  Commodity-Precious Metals (+3.95%) and Specialty Natural Resources (+3.16%). The weakest categories were: Shorts (-4.20%), Commodity-Agriculture (-2.13%), Sector-Consumer Staples (-1.33%) and Currencies (-0.46%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT