January has quite a reputation on Wall Street as an influx of cash from yearend bonuses and annual allocations has historically propelled stocks higher. January ranks #1 for NASDAQ (since 1971), but sixth on the S&P 500 and DJIA since 1950. January is the last month of the best three-consecutive-month span and holds a full docket of indicators and seasonalities. 

 

DJIA and S&P rankings did slip from 2000 to 2022 as both indices suffered losses in thirteen of those twenty-four Januarys with three in a row in: 2008 to 2010, 2014 to 2016 and then again from 2020 to 2022. January 2009 has the dubious honor of being the worst January on record for DJIA (-8.8%) and S&P 500 (-8.6%) since 1901 and 1930 respectively. Covid-19 spoiled January in 2020 & 2021 as DJIA, S&P 500, Russell 1000 and Russell 2000 all suffered declines in 2020. In 2021, DJIA, S&P 500 and Russell 1000 declined. In 2022 surging inflation, that reached multi-decade highs, stoked fears of substantially higher interest rates in January. Fears were ultimately validated as a bear market ensued.

 

Recent January weakness can be seen in the following chart (solid lines). Please note, the value on the first trading day is the average performance for that day. We do not start at zero on the first day because we are using the average change on that day which is not zero. January has on average started out positive with DJIA, S&P 500, NASDAQ, Russell 1000 and 2000 all logging gains in the first third of the month, but weakness then creeps in. From around the seventh trading day to the end of the month declines have prevailed over the last 21-years.

 

 

In post-presidential-election years, Januarys have been mixed. DJIA and S&P 500 slip to number #8 and average performance also dips. NASDAQ and Russell 2000 have historically performed the best in post-election year Januarys ranking #4 and #5 respectively with average gains exceeding 2%. 

 

 

On pages 112 and 114 of the Stock Trader’s Almanac 2025 we illustrate that the January Effect, where small caps begin to outperform large caps, actually tends to start in mid-December. Rising 10-year Treasury bond yields appear to be delaying typical small-cap outperformance this December. Historically, the majority of small-cap outperformance is normally done by mid-March, but strength can last until mid-June.

 

Created by Yale Hirsch in 1972, our first indicator to register a reading in January is the Santa Claus Rally. The seven-trading-day period begins on the open on December 24 and ends with the close of trading on January 3. Historically, the S&P 500 posts an average gain of 1.3%. The failure of stocks to rally during this time has tended to precede bear markets or times when stocks could be purchased at lower prices later in the New Year.

 

On January 8, our First Five Days “Early Warning” System will be in. In post-election years this indicator has a respectable record. In the last 18 post-election years 14 full years followed the direction of the First Five Days. The full-month January Barometer has the same record in post-election years.

 

Our flagship indicator the January Barometer, created by Yale Hirsch in 1972, simply states that as the S&P goes in January so goes the year. It came into effect in 1934 after the Twentieth Amendment moved the date that new Congresses convene to the first week of January and Presidential inaugurations to January 20.

 

The long-term record has been solid, an 83.8% accuracy rate, with 12 major errors since 1950.  Major errors occurred in the secular bear market years of 1966, 1968, 1982, 2001, 2003, 2009, 2010 and 2014 and again in 2016 as a mini bear came to an end. The tenth major error was in 2018 as a hawkish Fed continued to hike rates even as economic growth slowed and longer-term interest rates fell. Historical levels of support from the Fed and Federal governments in 2020 quickly undid the market damage caused by the Covid induced economic shutdown. 2021 was the 12th major error for the January Barometer as covid-related stimulus and spending propelled the market higher. The market’s position on the last trading day of January will give us a better read on the year to come. 

 

When all three of these indicators agree it has been prudent to heed their call. Since 1950, when all three January indicators, Santa Claus Rally, First Five Days and the full-month January Barometer are up, the January Trifecta, S&P 500 was up 90.6% of the time (29 out of 32 years) with an average gain of 17.7%. When one or more of the Trifecta is down the year is up 59.5% of the time (25 of 42) with a paltry average gain of 2.9%.

 

 

 

Our “Free Lunch” strategy is purely a short-term strategy reserved for the nimblest traders. Traders and investors tend to get rid of their losers near yearend for tax loss purposes, often driving these stocks down to bargain levels. Our research has shown that NYSE stocks trading at a new 52-week low on or about December 15 will usually outperform the market by February 15 in the following year. We have found that the most opportune time to compile our list is on the Friday of December quarterly options and index futures expiration.

 

This strategy takes advantage of several year-end patterns and indicators. First, the stocks selected are usually technically, deeply oversold and poised for a bounce, dead cat or otherwise. Second, many of the stocks are of the small- and mid-cap variety that will benefit from the January Effect which is the tendency for small-caps to outperform large-caps from mid-December through February. Lastly, the strategy spans the usually bullish Santa Claus Rally and the First Five Days of January.

 

To be included in this list this year, the stock must have traded at a new 52-week low on Friday, December 20, 2024. To remain on the list, the stock had to still be trading at $1.00 or higher as some trading platforms place additional restrictions on trades when shares are below $1.00. Furthermore, the stock must have traded at least 100,000 shares on average over the past 20 days and have a market cap of at least $500 million, but no greater than $20 billion. Then, any stock that was not down 40% or more from its 52-week high to the 52-week low reached on Friday was also eliminated. Additionally, we selected stocks that had volume on Friday that was at least 2.5x their average daily volume over the past 20 days. Finally, preferred stocks, funds, splits, special high dividends, and new issues (less than 1-year trading) were eliminated. No stocks from the American Stock Exchange made the cut.

 

Our suggested guidelines for trading these Free Lunch stocks are to initiate a position at a price no greater or less than 3% of Friday’s closing price and to implement a 20% trailing stop on a closing basis from the purchase price. If the stock closes below 20% of the execution price or a subsequent high watermark, then the stock would be closed out of the portfolio. If any of these stocks trade in a window between -3% to +3% of Friday’s closing price on Monday, December 23, it will be tracked in the Almanac Investor Stock Portfolios using the trade’s execution price with a 20% trailing stop on a closing basis. 

 

Given the recent rise in market volatility and the sizable, suggested stop loss percentage, we are only going to allocate a modest hypothetical $500 from the cash position in the Stock Portfolio to each stock that meets the buy criteria. Historically, the opportune time to enter these positions has been before the end of the year.

 

1. Consider selling them as soon as you have a sizable gain and utilize stop losses and/or position size to manage risk. 

2. The stocks all behave differently and there is no automatic trigger point to sell at. 

3. Standard trading rules from the Almanac Investor Stock & ETF Portfolios do not apply for these stocks. 

4. We think you should be out of all of these stocks between the middle of January and the middle of February. 

5. Be careful not to chase these stocks if they have already run away.

 

 

 

 

Please take a moment and register for our members’ only webinar, 2025 Annual Forecast and January 2025 Outlook on Wednesday January 8, 2025, at 2:00 PM EST here:

 

https://attendee.gotowebinar.com/register/7779594966398257750 

 

Please join us for an Almanac Investor Member’s Only discussion of recent market action with time for Q & A at the end. Jeff and Chris will cover their 2025 Forecast and outlook for January, review the Tactical Seasonal Switching Strategy ETF, Sector Rotation ETF, and Stock Portfolio holdings and trades. With the results of the Santa Claus Rally and First Five Days, we will share our assessments of the economy, Fed, inflation, post-election year 2025 as well as relevant updates to seasonals now in play.

 

If you are unable to attend the live event, please still register. Within a day of completion, we will send out an email with links to access the recording and the slides to everyone that registers.

 

After registering, you will receive a confirmation email containing information about joining the webinar and a reminder message.

 

 

12/19/2024: Dow 42342.24 | S&P 5867.08 | NASDAQ 19372.77 | Russell 2K 2221.50 | NYSE 18958.21 | Value Line Arith 10968.17

 

Seasonal: Bullish. January is the last month of the best three consecutive months. Although average performance and rankings have taken a hit due to weakness since 2000, January is still #1 NASDAQ (since 1971) month of the year and #6 for DJIA and S&P 500 (since 1950). Post-election year Januarys have been mixed and weaker based upon average performance. Our Santa Claus Rally ends on January 3, the First Five Days finish on the eighth and our January Barometer gives its read at month’s end. When all three are positive, our January Indicator Trifecta is nearly perfect with 29 S&P 500 full-year gains in 32 years.

 

Fundamental: Fair. Q3 GDP was revised up to 3.1% earlier today while the Atlanta Fed’s GDPNow model is projecting Q4 growth at 3.2%. The seasonally adjusted unemployment rate remains low at 4.2%. Corporate earnings have been generally firm, but a surging U.S. dollar and potentially higher tariffs on imports could slow or erode them. Inflation lingers but it is not running away. 

 

Technical: Consolidating. DJIA, S&P 500 and NASDAQ all logged new all-time closing highs in December. Russell 2000 has not. Blame the Fed, inflation & interest rates, profit taking, or tax-loss selling for all the major indexes retreating this week. All four indexes have fallen below their respective 50-day moving averages but 200-day moving averages are holding. As long as 200-day moving averages hold, then the current pullback is likely just consolidation in advance of the next move higher.

 

Monetary: 4.25 – 4.50%. The Fed did cut at its December meeting exactly as expected. However, the Fed also updated its outlook to reflect the recent lack of progress with inflation. Instead of a presumed four rate cuts in 2025, the Fed now sees just two. This may just be a more realistic view based upon inflation remaining stubbornly above 2%, but it still somehow managed to “surprise” the market. At least the market can now go back to hoping for more rate cuts in 2025.

 

Sentiment: Easing. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors stand at 59.0%. Correction advisors are at 24.6% while Bearish advisors number just 16.4% as of their December 18 release. Overall sentiment remains bullish but began softening last week. There will likely be even fewer bulls next week. Bullish sentiment can and has remained elevated for extended periods around the holidays. Any significant departure could be a potential issue. That has not yet occurred.

 

 

In our 2024 forecast we recapped our forecasts over the past several years versus how the market performed. We did pretty well. For 2024 we projected the bull market to continue with “More New All-Time Highs Anticipated,” and the potential for above average gains of 15-25%. We expected economic growth to slow and employment metrics to soften, but that it would remain healthy and that we would avoid recession. We also felt the Fed had a good shot at sticking the soft landing. 

 

With seven trading days left in 2024 and S&P 500 up 23.0%, our 2024 Forecast looks to be on track again. NASDAQ is up 29.2% while DJIA is up 12.3% and Russell 2000 brings up the rear with 10.1% gain year-to-date. Lagging small caps is a concern and along with keeping a close eye on our Santa Claus Rally and January Indicator Trifecta we will also be looking for broader market participation from the small cap sector. 

 

 

The Fed gave the market the quarter point rate cut it was expecting but made a concerted effort in its statement, quarterly economic projections, the dot plot and Chairman Powell’s presser to reset the market’s expectations for interest rate policy next year. We’ve been expecting less rate cuts moving forward into 2025 based on our reading of warming inflation data and bond market action since the September 50 basis point cut, most notably the 10-year Treasury yield breaking back above the 4.3% level in early November.

 

The Fed is concerned about inflation as it should be. We are too. It’s also encouraging to see them listening to and taking some cues from the bond market. This is how the Fed was designed to function, implementing guardrails on interest rates based on the bond market and economic data. This was the Fed walking the market back from its unrealistic rate cut expectations. It’s a classic under promise/over deliver posture.

 

We are not shocked by the Fed’s new slightly more hawkish posture. We have noted all year that the trend of cooling inflation would be difficult to sustain. We discussed it on our most recent members’ webinar earlier this month. The Fed has now admitted there is an issue with stubborn inflation, especially core inflation. We have updated our Inflation Projection charts of CPI and PCE here to help illustrate these inflation risks. 

 

Now that the Fed has made it clear that it will probably be cutting less with inflation warming, the market is set up to be pleasantly surprised if inflation settles down again and the Fed is able to lower rates further and faster toward a more neutral rate in line with annual GDP growth. 

 

 

 

Yesterday’s knee-jerk reaction selloff extended the Dow’s losing streak to 10 days, the longest daily losing streak since October 1974. This losing streak ended today. We posted this table below of Dow losing streaks on the December 17 blog. Historically, it took DJIA around 50 trading days to recover the losses accumulated during the past streaks. It may be a slow grind higher, but higher has historically been the subsequent path. Following the end of the previous eleven streaks, DJIA was higher 72.7% of the time 1-week, 2-weeks, and 1-month later. By the 3-month-after mark DJIA was higher 81.8% of the time with an average gain of 5.80% and a median advance of 7.59%.

 

Only two years were down three months later after these previous streaks ended. 1960 was Cold War related as Castro seized U.S. oil refineries in June-July of 1960 and the U.S cut off Cuban sugar imports. OPEC formed in September 1960 and the bear market bottomed on October 25 just ahead of John F. Kennedy winning the presidential election. World War II was raging in Europe in 1941 with the Germany invading Russia in June with many major battles waged throughout the second half of 1941. After Pearl Harbor was bombed on December 7, 1941, the multi-year bear continued lower until it bottomed in April 1942 once the USA entered the war.

 

Odds still suggest we are in store for a Santa Claus Rally and the continuation of the bull market. After the gains we have logged this year a bout of profit taking and a little fear is understandable and perhaps a healthy removal of some of the froth in the market and sentiment.

 

 

 

Despite the recent selloff the 4-Year Cycle and general market seasonality remain on track. The pullback has reverted the Dow back toward the mean though it remains above its cycle and election average gains. As we move into 2025, we will reset this chart to include the last four years of data and begin tracking 2025 and the next cycle. 

 

 

The chart below of the S&P 500 Seasonal Pattern for Post-Election Years appears on page 11 of the 2025 Almanac. It shows the basis for our annual forecast base case scenario with all but one line exhibiting solid gains for 2025. The Incumbent Party Losses pattern highlights the risks a change in party can have on the post-election year. If the market stays positive through January (think January Barometer) as the top four seasonal pattern lines do, we should be in good shape for 2025, notwithstanding some choppiness and pullbacks along the way as the market navigates the new administration and the new regime at the Fed.

 

We suspect Trump 2.0 policies will be supportive of the market and business and likely stir the animal spirits. Tariffs are likely to be used as a negotiating tactic to get folks to the table quickly. We have seen some of this already by the many world leaders who have visited and communicated with President-elect Trump over the past several weeks. He will likely employ his traditional “art-of-the-deal” shock and awe style to get people to the table to work on problems expeditiously. 

 

But as our research shows the midterm elections are usually tough on incumbents with their party prone to losing control of Congress – and the republican majorities in the next Congress are quite thin. So, he has about a two-year window to get his agenda implemented before the midterms. He is unlikely to pursue any policy that jeopardizes the prospects of ensuring he has a legacy of economic prosperity, a bull market and global stability. There will be successes and missteps and that will keep the market on its toes next year.

 

 

 

Economic activity remains resilient with GDP growth at 3% or better the past two quarters and is projected to come in around that level for Q4 2024. Let’s turn to our Four Horsemen of the Economy chart which depicts DJIA, Consumer Confidence, our inflation chart showing 6-month exponential moving averages of CPI and PPI and the unemployment rate overlaid with the recession bars. Note that we include the 2022 Q1 and Q2 recession we deem transpired based on the pre-Covid definition of two back-to-back down quarters of GDP. 

 

The lead horse of our Four Horsemen of the Economy is The Dow Jones Industrial Average. And while Papa Dow has lagged the S&P and NASDAQ and had some issues recently (great timing on adding Nvidia) it is still in a solid uptrend and not far off its all-time high hit earlier this month. Most of today’s gains in early trading were reversed but the Dow managed to post a gain and end its daily losing streak at 10 days.

 

Consumer Confidence pulled back earlier this year but remains in its uptrend since the 2022 lows. Holiday shopping was robust this year as you can see from the recent uptick in the ConCon chart. Inflation is still on people’s minds as prices of many staples remain significantly higher than they were just a couple years ago. But it does not seem to be curtailing consumer spending across the board.

 

Our inflation projection data discussed above highlights the risks over the near term should inflation heat up again. But looking at our inflation chart of the 6-month exponential moving average of CPI and PPI, consumer prices as measured by CPI remain in a downtrend, though producer prices (PPI) have ticked up this year. Definitely an important trend on our radar.

 

Also concerning is the uptrend in the Unemployment Rate this year. Recent labor market data points have been stable, but if that changes and Unemployment picks up along with inflation and they both trend higher that would also be concerning. But for now, Unemployment Rate remains historically low and the Fed remains accommodative. 

 

 

 

After closing above 45000 for the first time ever on December 4, DJIA fell into a 10-trading day losing slump. DJIA has endured a consecutive daily losing streak of this duration or longer just six times going all the way back to 1901. The last streak of similar duration was an 11-day streak that ended in October 1974. Total losses during DJIA’s recent losing steak were on the mild side until yesterday, December 18, when it dropped 1123.03 points (–2.58%). DJIA has now fallen below its 50-day moving average (1) but remains above its key 200-day moving average. Bullishly, DJIA uptrend from its October 2023 low remains intact.

 

Both the faster and slower moving MACD indicators applied to DJIA have been negative (2) since the close on December 9, confirming the loss of positive momentum in the near term. Due to the duration and magnitude of recent declines, both MACD indicators will likely remain negative longer even if DJIA does reverse course.  

 

 

Prior to the start of December, DJIA had recorded just six Down Friday/Down Monday (DF/DM) occurrences in 2024. With two full weeks of trading completed in December, DJIA has recorded two more DF/DMs (3) bringing its total to eight, which if this number holds, will still be below its historical average going back to 1995 (2025 STA page 78). December’s back-to-back DF/DMs are the first since June 2023. Back then DJIA went on the log gains in four of the five following weeks before correcting through August, September and October.

 

Despite DJIA’s recent woes, S&P 500 (4) and NASDAQ (5) have held up better mainly due to tech-share resilience. Coming into this week, NASDAQ had only declined twice during the past fourteen weeks and was up four straight weeks. If the market can come to terms with the Fed’s new outlook on rates quickly, and tax-loss selling/profit taking abates, then the recent pullback appears like a fair setup for a Santa Claus Rally to close out 2024 and kick off the New Year.

 

Weekly market breadth data has been deteriorating in December. Even with gains by NASDAQ during the first two weeks of December (and S&P 500 during the first week), Weekly Decliners have outnumbered Weekly Advancers the past two weeks (6). Looking back one year ago, a similar situation occurred in late December and early January but that did not stop the market from advancing for 5 weeks straight starting the second week of January 2024.

 

The market’s push to new all-time highs in early December was not accompanied by an expansion of new 52-week Highs. Instead, New Highs were declining and New Lows expanded (7). At a minimum it would be encouraging to see the number of New Lows stop growing and retreat. That may not happen until next week.

 

The writing was on the wall and in the data. Recent CPI and PPI readings were warm, and the 30-year Treasury rate had been trending higher (8) along with the 10-year Treasury Yield. Tomorrow’s PCE reading is also likely to signal the same, inflation’s retreat has slowed/stalled out. If PCE is inline or better than anticipated, the market could easily switch gears back to expecting more, rather than less, rate cuts from the Fed in 2025.

 

 

 

As we present our outlook for 2025 let’s remember not to overreact to the big selloff yesterday, the Dow’s losing streak and the Fed resetting expectations. In our view rate cuts are not necessary, but the Fed promised them to the market so walking back those expectations is not such a bad idea. Ask yourself what has changed materially or economically since the Fed’s announcement yesterday? Not much other than the dot plot and the Fed’s posture and rhetoric. 

 

Yes, it will be important for the market to resume its rally in short order and for December yearend seasonality to kick in as well as small caps to get out of their funk. It has been a huge year, and the market has come a long way over the past two years so some profit taking here is not unusual. Our January Indicator Trifecta, which incorporates the Santa Claus Rally, the First Five Days and the January Barometer are likely to prove critical this year.

 

Base Case: 65% Probability – Bull market tacks on average market gains of 8-12% with pullbacks in Q1 and Q3. Choppy trading as the market navigates change in Washington and the Fed trying to balance inflationary forces with sustained economic growth and a stable labor market.

 

Best Case: 25% Probability – Trump administration proves effective with few missteps. Inflation remains contained and U.S. economy continues steady growth without overheating or stalling. Geopolitics cools. Goldilocks scenario. More of a recent post-election pattern as the best year of the 4-year cycle since 1985 (page 11, Stock Trader’s Almanac 2025). Above average gains or 12-20%.

 

Worst Case: 10% Probability – Old school weak Republican President post-election year performance (page 28, Stock Trader’s Almanac 2025). Trump administration and Republican Congress implement to many drastic measures. Inflation spikes, economy cools, rates higher for longer and stubborn global turmoil. Teetering on bear market recession territory. Flat to negative full-year performance with broad losses across most asset classes.

 

While we are concerned about inflation, valuations and the older weak post-election patterns, we expect the bull market to continue through 2025, though it will likely be a much bumpier ride than it has been the last two years. Happy Holidays & Happy New Year, we wish you all a healthy and prosperous 2025!

 

With small-cap season scheduled to kickoff next week we wanted to bring you a stock idea that’s a little different than our usual recommendations. Healwell AI Inc (HWAIF) is a very early-stage company, but it is moving fast and is supported by a seasoned team and a large Canadian healthcare company. 

 

While much of the push to improve corporate efficiency and productivity with AI is being driven and run by Palantir, organizing and mining through the maze and mess of medical records and patient data is not being done on a major scale as far as we know. This is where Healwell AI comes in. Their mission is to improve healthcare through early identification and detection of disease using its suite of AI co-pilots to detect rare and chronic diseases and improve diagnostic and treatment efficiency. 

 

 

Last month I accepted an invitation to the company’s AI Investor Intelligence Summit in Scottsdale with a host of other analysts and newsletter writers. We have made it quite clear over the past year or so that AI appears to be the “culturally-enabling-paradigm-shifting technology” we speak of that fuels our Super Boom Forecast and outlook (2025 Stock Trader’s Almanac page 11 and April 11, 2024 Issue). As many of you have noticed, I have also been on a health and fitness kick – more of a lifestyle change – the past few years, down 60 lbs. in the process. So, the prospect of learning about a new company harnessing AI for the benefit of everyone’s health was something I had to explore. 

 

Yes, we were wined and dined and played some golf, but we were also treated to two full days of meetings with the company and its principles. I was also given the opportunity to interview the CEO and Chairman which was recorded in a podcast format. I teamed up on the podcast with my longtime friend and fellow newsletter writer Hilary Kramer. Here’s the link if you want to check it out.

 

The company’s main stock listing is in Canada on the Toronto Stock Exchange under the ticker AIDX. The US listing is on the OTCQX which is the top tier of the over-the-counter market, a step above the bulletin board and the pink sheets. The company is planning to list the stock on a major U.S. market in the near future, likely NASDAQ. Including all stock options, convertible debentures and warrants, Healwell has a fully diluted market cap of about $379.8 million at today’s closing price of $1.45.

 

The company has been built through a strategic merger and acquisition strategy and is aggressively continuing to pursue that. This is the same strategy the co-founder and chairman perfected at WELL Health Technologies (WELL.TSX), a multichannel digital health technology company and Canada's largest owner and operator of outpatient health clinics. WELL Health is the company’s strategic partner.

 

Healwell is on pace to be at an annual run-rate of $75 million in revenue by the end of 2024 and is committed to profitability it 2025. The company has a two-pronged growth strategy: 

 

1. To increase its AI capabilities through strategic technology acquisitions like the deal announced earlier this month to acquire a controlling interest in Mutuo Health Solutions for cash and stock. Mutuo has a remarkable AI-scribe technology, AutoScribe, that transcribes clinician-patient dialogue into structured electronic medical records (EMR) data in real-time using machine learning (ML) and natural language processing (NLP).

2. To acquire or partner with major healthcare companies to grow their database of doctors and patient data. The company is currently working on closing a potentially transformational deal in this space with a mature healthcare software and research operation by the end of the year.

 

The company’s technology can currently scan for about 400 different conditions and is being used by about 1000 physicians. 300 of those physicians are at WELL Health. The remaining physicians are at nine other Canadian firms and two firms in the U.S. Healwell currently has a suite of four proprietary AI enabled decision support physician co-pilots. Healwell plans to incorporate Mutuo’s AutoScribe with its existing co-pilots, creating a next generation suite of AI powered physician co-pilots that significantly elevate physician efficiency.

 

Currently underfollowed by U.S. brokerage firms, investment banks and analysts I suspect they will soon be covered by a prominent firm. Remember this stock is early stage and until recently relatively unknown so trade it carefully within your risk/reward profile with sensibly sized positions. HWAIF can be considered on dips below a buy limit of $1.40.

 

 

This December has gotten off to the choppy start that we noted in the November 26, email Issue. On the heels of yesterday’s inline CPI report, today’s warmer than expected PPI caused the opposite response from the market today. Despite today’s market weakness and the warm PPI report, the Fed is still widely expected to cut its key lending rate next week. Likely, even more important, the Fed will also be providing an update to its Summary of Economic Projections. This update could shed some additional, much needed, light on where the Fed thinks the economy and interest rates may be headed in 2025. The timing of this year’s December Fed meeting also happens to line up rather nicely with the historical trough in December. Provided the Fed does not upset the market, it could easily be the catalyst that sparks the typical second half of December rally.

 

 

 

 

Over the past five weeks through yesterday’s close (December 11), S&P 500 advanced 2.6% while Russell 2000 inched 0.1% higher. Over the same period the entire stock portfolio gained 1.8% excluding dividends, interest from cash, and any trading fees. Delving deeper into the stock portfolio, Large caps were responsible for all the portfolio gains, advancing 3.0% while Mid- and Small-cap positions both slipped modestly lower on average.

 

Gains were spread fairly evenly across the majority of Large-cap stocks. AT&T (T), Asurant Inc (AIZ), Sterling Infrastructure (STRL), Comfort Systems (FIX), Garmin (GRMN), and ICIC Bank (IBN) all advanced over the last five weeks. STRL, FIX, GRMN and IBN can all still be considered on dips. As a reminder, this is not a new trade recommendation. If you do not have a position, please consider utilizing existing and updated buy limits to establish positions.

 

SPX Technologies (SPXC) is the lone large-cap position in the red and can still be considered at or near its current price up to its buy limit. SPXC is still in a long-term uptrend, but price action has become increasingly volatile since July. Its solid share gains year-to-date have been driven by strong growth from its HVAC business. This trend is likely to continue as the demand for/from data centers, healthcare and residential markets is likely to remain firm.

 

Mid-cap performance was not as robust. Silvercorp Metals (SVM) was stopped out on November 11 when it closed below its stop loss. SVM was sold at its stop loss of $3.97 resulting in a 17.8% loss. Shares have tumbled even further as interest in gold and silver has waned since shortly after Election Day. It is also a reminder that the seasonally bullish period for gold and silver mining stocks has historically ended in December.

 

Offsetting the negative performance of SVM, Amstrong World Industries (AWI) traded above $160.96 on November 25, triggering our profit taking rule of selling half the original position when it first doubles. AWI has since modestly retreated and is on Hold. Even after doubling in just over one year, AWI’s valuation remains reasonable suggesting further upside is likely.

 

Another mid-cap performer worthy of attention is OSI Systems (OSIS). Since breaking out in mid-November, it has stormed higher nearly everyday going from around $150 to briefly over $189 today. Beyond logging multiple new 52-week highs, it is also at new all-time highs. OSIS can still be considered on dips but remain patient and refrain from chasing at this point. It would not be surprising to see OSIS pause and consolidate some of its recent, hefty gains. Being patient also applies to GRMN and Carnival (CUK).

 

Per last update, Universal Stainless (USAP) has been sold and closed out of the portfolio. USAP was sold on November 8 at $44.00 resulting in a fractional gain of 0.3%. USAP is being acquired in a deal that values it at $45 per share but the deal is not expected to close until sometime in Q1 of next year. There are better opportunities available.

 

Crexendo (CXDO) and Wildan Group (WLDN) have retreated and are currently in the red. WLDN has had a good year and it appears that it is currently enduring some profit taking. CXDO weakness could be the result of some tax-loss selling by longer-term holders. CXDO and WLDN can be considered at or near current prices.

 

With natural gas prices trending higher, Navigator Holding (NVGS) can be considered on dips below a buy limit of $15.30. NVGS is the second longest holding in the portfolio and it has been treading water for most of this year. Should natural gas continue higher and/or the export market resume growing, NVGS could finally break out of its trading range.

 

Please see the table below for updated advice, stop losses and buy limits where applicable.

 

 

 

For those who were unable to attend the member’s only webinar on Wednesday, the slides and video recording are available here (or copy and paste in a new browser window: https://www.stocktradersalmanac.com/LandingPages/webinar-archive.aspx). In addition to the seasonal pattern charts we have been tracking and presenting throughout the year, Jeff reviewed the numerous seasonal indicators and patterns that occur in December and carryover into January.

 

Shortly after first half December choppiness comes to an end, most likely around Friday the 13th, we will serve up the annual Free Lunch basket of stocks, page 116 of the Almanac, via email Issue before the market opens on December 23. Around the same time, we will be looking for early signs of small-cap outperformance, pages 112 and 114, followed by our Santa Claus Rally, the First Five Days of January and the full-month January Barometer. Based upon the outcome of these three indicators, we may adjust our outlook for the balance of Q1 and 2025. Until then, we remain bullish as this is the seasonal favorable period for stocks. Valuations are a concern, but economic data is holding up, the Fed is cutting interest rates, and the market continues to track seasonal trends and patterns rather closely.

 

Copper’s Bullish Seasonality 

 

Copper tends to make a major seasonal bottom in November/December and then tends to post major seasonal peaks in April or May. This pattern could be due to the buildup of inventories by miners and manufacturers as the construction season begins in late winter to early spring. Auto makers are also preparing for the new car model year that often begins in mid- to late summer. Traders can look to go long a May futures contract on or about December 13 and hold until about February 24.

 

In this trade’s 52-year history, it has worked 34 times for a success rate of 65.4%. The average gain in all years is 5.4%. After four straight years of declines from 2012 to 2015, this trade has been successful in six of the last eight years with solid theoretical gains. Last year, copper was essentially flat from mid-December until mid-March before ripping higher through mid-May. Strictly following the suggested hold period did result in a minor loss, while holding positions longer (which was done in the Sector Rotation ETF Portfolio last year) resulted in solid gains

 

Cumulative profit, based upon trading a single futures contract excluding commissions and fees, is a respectable $101,263. Slightly less than one-fifth of that profit came in 2007, as the cyclical boom in the commodity market magnified that year’s seasonal price move. However, this trade has produced other notable big gains per single contract, such as the $16,350 gain from December 2020 to February 2021, and even back in 2011, it registered another substantial $14,475 gain. The worst loss occurred from December 2014 to 2015 when copper declined 11.8% generating a theoretical loss of $8,625. These numbers show this trade can produce big wins and big losses if not properly managed. A basic trailing stop loss could have mitigated many of the historical losses.

 

 

In the following chart, the front-month copper futures weekly price moves (top pane), and seasonal pattern (bottom pane) are plotted. Typical seasonal strength in copper is depicted by a blue arrow and yellow shading in the lower pane of the chart. Last year’s seasonal period is visible in the top pane of the chart. Since copper’s mid-May peak, its trend has generally been lower with a brief surge in September. Copper’s August low appears to have been retested in November and now appears to be beginning a new trend higher. This new positive trend does align well with copper’s typical seasonal pattern. Another interest rate cut by the Fed later this month could boost copper further due to potentially lower interest rates for autos and houses spurring demand.

 

 

One option that provides exposure to the copper futures market without having to have a futures trading account, is United States Copper (CPER). This ETF tracks the daily performance of the SummerHaven Copper Index Total Return less fund expenses. CPER’s daily volume can be on the light side, but it does appear to be adequately liquid with average daily volume jumping above 100,000 shares when copper does move. Stochastic, relative strength and MACD technical indicators applied to CPER are all positive and trending higher. 

 

A position in CPER can be considered on dips below a buy limit of $25.90. If purchased an initial stop loss of $23.63 is suggested. This trade will be tracked in the Almanac Investor Sector Rotation ETF Portfolio. For tracking purposes, CPER will be added to the portfolio should it trade below its buy limit.

 

 

Another way to gain exposure to copper and its seasonally strong period is through the companies that mine and produce copper. Global X Copper Miners ETF (COPX) holds shares of some of the largest copper miners and producers from across the globe. Its top five holdings as of December 4, 2024, are: First Quantum, Boliden AB, Ivanhoe Mines, Lundin Mining, and Antofagasta. COPX could be considered on dips below a buy limit of $42.05. If purchased, an initial stop loss of $38.37 is suggested. This trade will also be tracked in the Sector Rotation section of the ETF Portfolio. For tracking purposes, COPX will be added to the portfolio when it trades below its buy limit.

 

 

 

Oil companies typically come into favor in mid-December and remain so until late April or early May in the following year (blue arrow and yellow shade in lower pane). This trade has averaged 11.55%, 10.29%, and 11.71% over the last 25-, 10-, and 5-year periods respectively. Seasonal strength in crude oil has also been ending sooner, typically in late April or early May instead of late June or July over the past ten years. As a reminder, this seasonality is not based upon the commodity itself (crude oil or natural gas); rather it is based upon NYSE ARCA Oil & Gas index (XOI). This price-weighted index is composed of major companies that explore and produce oil and gas.

 

 

SPDR Energy (XLE) is the top pick to trade this seasonal setup. A new position in XLE can be considered on dips with a buy limit of $91.75. Employ an initial stop loss of $83.72. Consider taking profits at the auto-sell price of $112.58. Exxon Mobil is the top holding in XLE at 21.37%. The remaining top five holdings of XLE are Chevron, ConocoPhillips, Williams Companies, and ONEOK. For tracking purposes, XLE will be added to the portfolio when it trades below its buy limit.

 

 

A second option that may perform well with the new incoming administration is SPDR S&P Oil & Gas Equipment & Services (XES). Domestic production and supplies of crude oil and natural gas are currently ample. Bringing additional supply to market would likely drive prices for the commodities lower, but it could also lead to an increase for oil & gas equipment and services. XES can be considered on dips below a buy limit of $82.65. If purchased, consider utilizing an initial stop loss at $75.42. For tracking purposes, XES will be added to the portfolio when it trades below its buy limit.

 

 

 

On seasonal cue, the Sector Rotation ETF portfolio has rebounded to an average gain of 5.2%. Our Seasonal MACD Buy Signal was early this year, but late-October market weakness provided ample opportunity to establish positions at better levels ahead of the market’s post-Election-Day surge. As of the close on December 4, the top performing holding was iShares Bitcoin Trust (IBIT), up 29.7%. Bitcoin did briefly break through $100,000 today but retreated off its highs. IBIT is on Hold.

 

iShares US Technology (IYW) and SPDR Consumer Discretionary (XLY) round out the top three positions in the portfolio up 15.1% and 14.8% respectively. IYW and XLY can still be considered on dips below their buy limits. Please note, if you already hold an existing position in the various ETFs in the Sector Rotation portfolio this is not a new recommendation. If you do not have a position, please consider utilizing existing and updated buy limits to establish positions during any first half December weakness.

 

Historical seasonal strength in gold and silver stocks usually ends in December. However, it appears to have ended just after Election Day this year. VanEck Gold Miners (GDX) and SPDR Gold (GLD) were both stopped out on November 11 when they closed below their stop losses. Proceeds from the sale of these positions may be better used in the new trade ideas above. 

 

Telecom’s seasonally favorable period has historically come to an end in late December (page 94 STA). iShares DJ US Telecom (IYZ) is on Hold. Semiconductors also end their favorable season in December. iShares Semiconductor (SOXX) is on Hold. IYZ is having an above average seasonal period, but SOXX has been floundering.

 

All other positions in the Sector Rotation portfolio can still be considered on dips below their respective buy limits or at current levels. Buy limits have been adjusted, where applicable, for recent gains in the table below.

 

 

 

The “Best Months” are here, the market has been rallying and we remain bullish as election year 2024 nears its end and on into 2025. This has been our stance since our Seasonal MACD Buy signal criteria was met in October and it has been paying off thus far with the Tactical Seasonal Switching portfolio gain climbing to 5.8% as of the close on December 4. The market is exhibiting some choppy trading here in the first half of December. This is expected and is suggested by December’s typical seasonal pattern. Based upon that pattern we are anticipating that once tax-loss selling abates, the market will likely resume its record setting run in the second half of December and likely into the New Year.

 

From now until second-half December strength materializes, “Best Months” positions, QQQ, IWM, DIA and SPY can still be considered near current levels up to their respective buy limits.