December 19, 2025

A choppy week finished little changed on a rotation in and out of technology shares and a softer than expected inflation report that was met with skepticism. The period opened with continued rotation out of AI-related and technology shares with more economically sensitive sectors catching the outflows. Investors were content to wait on jobs and inflation released later in the week, but oil related stocks were pummeled on Tuesday with the crude oil prices sliding to their lowest level since 2021 on oversupply and weaker demand concerns. Tech shares took another hit midweek on another plunge in Oracle (ORCL) on a report that one of its primary investors was pulling out of its data center project. Energy infrastructure stocks including GE Vernova (GEV) and Vertiv Holdings (VRT) also sold off on the news. Blowout earnings and upbeat guidance from Micron Technologies (MU) on Thursday put a bid back into the tech sector with the memory chip maker soaring +10.21% and boosting the Philadelphia Semiconductor Index (SOX) by +2.51% on the day. Also giving equities a hand up was a much tamer inflation report in the October/November CPI. The Headline CPI rose +2.7% vs. +3.1% estimated and core-CPI increased +2.6% vs. +3.0% expected. Market participants were skeptical of the data however, witnessed by the CME Group FedWatch projecting only a +22.1% probability of a January rate cut. The different indexes were able to build on Thursday's advance to end the week as hopes for a Santa rally brought buyers in off the sidelines ending the week on a high note. The gains were led by a +7.03% spike in Oracle after Tik-Tok agreed to sell its US operations to a group that included the company. The market sectors finished the period mixed with Consumer Discretionary (XLY), technology (XLK), Healthcare (XLV) and Materials (XLB) outperforming, while Energy (XLE), REITs (XLRE) and Consumer Staples (XLP) were the weakest market groups. While crypto currencies continued to struggle, a flight to safer assets saw Gold and Silver close near all-time highs. Friday's gains weren't enough to extend the DJIA's three-week win streak, but the S&P 500 and NASDAQ closed with modest gains. Next week, the NYSE will close early on Wednesday and Wall Street will be on Holiday on Thursday before traders come back to a full session on Friday. While a 'Santa' rally isn't guaranteed, since 1928, the stock market has traded higher the last two weeks of December 75% of the time.

For the period, the DJIA lost 323.16 points (-0.7%) and settled at 48134.89. The S&P 500 added 7.09 points (+0.1%) and closed at 6834.50. The NASDAQ gained 112.45 points (+0.5%) finishing at 23,307.62, while the small cap Russell 2000 fell 22.04 points (-0.9%) and settled at 2529.42.

Market Outlook: The technical condition of the market remains positive but was mixed and range bound with the S&P 500 and NASDAQ eking out small gains. Most of the technical indicators for the different indexes are in neutral ground, including the MACD, a short-term trend gauge, Momentum, as measured by the 14-day RSI, improved the latter part of the week. After briefly breaking below key support at their respective 50-day MA this week, the S&P 500 and NASDAQ were able to cross back above that level as the week ended, which could be a precursor to a coming 'Santa' rally. The DJIA never tested that support area and closed a chip shot away from its record high from the prior week. The secondary indexes were steady with the DJ Transportation Index working off some of its overbought condition, while the small cap Russell 2000 finished just below its record high. The Philadelphia Semiconductor Index, which was hit hard by the rotation out of tech shares, was also able to reclaim its 50-day MA this week and closed higher, a positive sign for an end of the year rally. Traders seemed to take the back and forth trading this week in stride with the VIX sliding to 14.91. Finally, a look at the charts of the different indexes shows all of the indexes held above their November lows, a bullish pattern if we can see the highs of December taken out. Although the NASDAQ chart shows a pennant pattern that sends mixed signals, if the tech heavy index can lift off its 50-day MA next week it would be a bullish breakout of that pattern. However, if the overweighted big cap and Mag 7 see more weakness, it could throw a wrench into hopes for a late rally and weigh on the broader market but the tech heavy index closed on a high note on Friday.

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 into 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, up four notches from the previous week. Breadth was mixed at the NYSE as the Advance/Decline line lost 170 units while the number of new 52-week highs exceeded the number of new lows on all five sessions. Breadth was negative at the NASDAQ as the A/D line lost 550 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 fell to 54.2% vs. 62.6% the previous week, while those above their 200-day moving average eased to 66.0% vs. 69.0% 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, flat, but is close to its old high hit last week. New 52-week highs on the NYSE also topped the new lows but saw some contraction. The rotation out of technology shares weighed on the NASDAQ A/D line, and more concerning, is the expansion in the number of new 52-week lows this week. That negative breadth needs to turn around with a move into more cyclical stocks for a yearend rally to transpire.

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 up a notch from the previous week.

Investor sentiment continues to lean heavily towards the bull camp. The National Association of Active Investment Managers (NAAIM) Exposure Index shows the professionals are flirting with buying on margin moving up to 100.7% invested in equities. That's the highest percentage since 1029/25. The Percentage of Bullish Investment Advisors is in neutral ground, but bears are hard to find and the Percentage of Bearish Investment Advisors was down for a third consecutive week to 17%, and has only been above 20% once over the last 18 weeks! Retail bulls are back on board at 44.1% and above the historical bullish average of 37.5% for a third straight week. In addition, FINRA shows November margin in accounts hit another all-time high which is a sign of excessive bullishness as the appetite for risk assets heats up. Finally, however, there is one sign that shows some pessimism towards the market. Short interest at the NASDAQ had jumped +7.4% at the end of November, a sign that investors are concerned about an AI bubble.

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 (11) - What's Not (19): The following are the strongest and weakest Industry Groups for the period ending 12/18/25. Strongest: Transportation, Banking, Healthcare Products and Metals & Mining and. Weakest: Paper & Forest Products, Technology Services, Building Materials and Technology Hardware. 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 12/18/25 were: Shorts (+3.10%), Commodity-Precious Metals (+1.70%) and Sector-Consumer Staples (+0.49%). The weakest categories were: Specialty Technology (-6.13%), Sector-Energy (-6.05%), Sector-Alternative Energy (-4.21%), Growth-Small Cap (-3.91%) and Blend-Small Cap (-3.80%). To review all the ETF categories in the Market Edge universe, click on the ETF Center tab.

By David L. Blake, CMT