January has quite a reputation on Wall Street as an influx of cash from year-end bonuses and annual allocations have historically propelled stocks higher. January ranks #1 for NASDAQ (since 1971), but fifth 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 slipped 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). January has on average started out positive with DJIA, S&P 500, NASDAQ, Russell 1000 and 2000 all logging gains through around mid-month, but weakness has tended to creep in with sideways and choppy trading through the end of the month. The weakest stretch in January on average has been from around the seventh trading day through the twelfth or thirteenth trading day.

 

 

In midterm years, January ranks near the bottom since 1950. Large caps have been the worst with S&P 500 ranking #11 (second worst) with DJIA and Russell 1000 ranking #9 and #10 respectively. Technology shares have fared better in the rankings, but average performance is still negative and NASDAQ has declined more times than it has risen (down 7 and up 6). 

 

 

On pages 112 and 114 of the Stock Trader’s Almanac 2026 we illustrate that the “January Effect,” where small caps begin to outperform large caps, actually tends to start in mid-December. Despite today’s setback, Russell 2000 has taken the lead this December and was up 2.33% as of its close on December 22 compared to a gain of 0.51% by the Russell 1000. Historically, the majority of small-cap outperformance is normally done by mid-March, but strength can last until mid-June.

 

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 5. 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 better prices later in the New Year.

 

On January 8, our First Five Days “Early Warning” System will be in. In midterm years this indicator has a spotty record. In the last 19 midterm years, just 9 full years followed the direction of the First Five Days. The full-month January Barometer has a modestly better record in midterm 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 84.0% 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 government 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, a positive “January Indicator 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 60.5% of the time (26 of 43) with a paltry average gain of 3.4%.

 

 

 

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. Research has shown that NYSE stocks trading at a new 52-week low on or about December 15 can outperform the market by around February 15 in the following year. We have found that the most opportune time to compile this list is on 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 19, 2025. 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. 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 an 8% trailing stop on a closing basis from the purchase price. If the stock closes below 8% 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 22, it will be tracked in the Almanac Investor Stock Portfolios using the trade’s execution price with an 8% trailing stop on a closing basis. 

 

Given persistent market volatility and the 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. Also, be careful not to chase these stocks if they have already run away.

 

 

 

 

If you missed our member’s only webinar yesterday, December 17, the slides and a link to the video recording can be found here (or copy and paste in a new browser window: https://www.stocktradersalmanac.com/LandingPages/webinar-archive.aspx). This webinar was focused almost exclusively on our 2026 Forecast and January 2026 Outlook. Based upon the 6th year of presidential terms along with the current outlook for economic growth and monetary policy, our base case scenario for 2026 has improved when compared to the older outlook in the 2026 Stock Trader’s Almanac. Rather than a typical, old school, ugly, and highly volatile midterm year, we are now looking for full-year gains in 2026 of around 8-12%.

 

For those that track the Decennial Cycle (STA page 131), years ending in “6,” are on a solid run. In addition to DJIA’s streak of five straight gains in years ending in 6, S&P 500 has matched that streak, while NASDAQ and Russell 2000 have never declined in a year ending in 6. S&P 500’s average gain in years ending in 6 since 1976 is an impressive 15.4%. All the tables and data for the Decennial Cycle were included in yesterday’s 2026 Annual Forecast webinar.

 

Although we did not provide specific forecasts for gold, silver, bitcoin, crude oil, natural gas, and copper, we did cover their respective performance in midterm years and 6th years of presidential terms with seasonal pattern charts for all. Midterm seasonals for gold, silver, and copper suggest the current rally could easily extend into the New Year. Current weakness in energy could also persist in 2026 based upon midterm seasonal patterns for crude and natural gas. Bitcoin has historically had a tough time in midterm years, and its recent weakness could morph into a nasty bear next year if investor interest continues to wane.

 

In the near-term, we remain bullish and are encouraged by today’s rally. Compared to December’s performance in previous post-election years, today’s advance appears to have arrived right on seasonal cue following a choppy and volatile first half of December. The volatility this December is clearly visible in the following chart with 2025 plotted on the right scale which is double the historical averages.

 

 

As of today’s close, DJIA and Russell 2000 are positive for December, up 0.49% and 0.30% respectively. NASDAQ has been the weakest, down 1.54% with tech-heavy S&P 500 and Russell 1000 also down just over 1%. It is also notable that this December’s NASDAQ and S&P 500 underperformance is consistent with past post-election years. Provided the market can hold today’s gains the second half of December rally has likely begun. Historically bullish week after quarterly options expiration (STA page 108) combined with holiday cheer (STA page 80) could propel the market higher through year end.

 

 

Over the past six weeks, through the close on December 17, the Almanac Investor Stock Portfolio slipped 1.6% lower, excluding dividends and any potential interest generated by the cash position, compared to a 1.1% decline by S&P 500 and a 1.1% gain by Russell 2000. Across the portfolio, small-cap positions were best on average, advancing 3.5% while mid- and large-cap positions declined on average.

 

HealWell AI (HWAIF) is on Hold. Broader market AI valuation concerns and likely tax-loss selling has driven HWAIF to its lowest levels ever. The magnitude of the sell-off does appear overdone and we will be looking for a rebound early next year and a likely exit as patience has run thin with management. Management did deliver on its revenue and earnings forecasts, but it still needs a mainstream exchange listing. HWAIF was and still is a highly speculative trade. 

 

EZCorp (EZPW) was added to the portfolio on November 7 when it first traded below its updated buy limit. EZPW can still be considered on dips below its buy limit. As an owner and operator of pawn businesses in the US and Latin America, it is likely to continue to benefit from a murky US labor market and record high prices for silver and gold. EZPW’s double-digit gain since addition to the portfolio contributed to small-cap outperformance.

 

Collegium Pharmaceutical (COLL) has continued to climb since last month’s earnings report, and it closed at a new 52-week and all-time highs today. Major analysts have begun to notice and price targets are on the rise. Earnings estimates are also bullishly moving higher while its valuation appears reasonable. COLL can still be considered on dips. 

 

Super Micro Computer (SMCI) woes have persisted, and its retreat is responsible for a substantial amount of the portfolio’s overall decline. Broader AI valuation concerns combined with SMCI’s tumultuous history are most likely the main forces behind its retreat. SMCI appears to be on course to test its April lows. If that level holds, it could be the support shares are desperately seeking. SMCI is on Hold.

 

Grand Canyon Ed (LOPE) was stopped out on November 6 and has been closed out of the portfolio for a total gain of 22.0%.

 

InterDigital (IDCC) and OSI Systems (OSIS) have also come under pressure and retreated from their respective highs from October and early November. Their combined declines were another drag on overall portfolio performance. IDCC and OSIS are both technology companies and are likely suffering from broad tech weakness and profit taking. Their valuations do not appear to be at the extremes associated with other technology companies. IDCC and OSIS are on Hold.

 

Rambus (RMBS) was added to the portfolio on November 13 when it dipped below its buy limit of $95. RMBS uptrend off its April low appears intact but it has gotten much more volatile over the past few months. RMBS can still be considered at current levels up to its buy limit.

 

Encompass Health (EHC) has struggled since releasing earnings in late October. Earnings were better than estimates but apparently not enough to appease investors. At its current price it has relatively attractive valuation metrics and trades at a sizable discount to analyst’s price targets. EHC can be considered at current levels up to a buy limit of $110.

 

Please see table below for most recent advice. Note some stop losses and buy limits have been updated to account for recent market moves.

 

 

 

Wishing you Happy Holidays and all good things in the New Year as we look ahead to 2026.

 

Please take a moment and register for our members’ only webinar, 2026 Annual Forecast & January 2026 Outlook on Wednesday December 17, 2025, at 4:00 PM EDT here:

 

https://attendee.gotowebinar.com/register/5222640001972119385    

 

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 2026 Annual Forecast and outlook for January 2026. They will also share assessments of the economy, the Fed, inflation, geopolitical events 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.

 

We are switching things up this year to get our 2026 Forecast out to you early. Today we present to you our updated 2026 Annual Forecast. Spoiler alert: it’s a little more bullish than initially anticipated and what we published in the 2026 Stock Trader’s Almanac on pages 10-11 dated May 30, 2025. We are also focusing this issue purely on the forecast. When we publish the “January 2026 Almanac & Vital Stats” just before our Christmas-New Year’s break it will include the “Pulse of the Market” and “Market at a Glance.” So here is the updated December/early-January Publication Schedule.

 

• 2026 Annual Forecast today December 11

• Monthly Member’s Webinar Wednesday, December 17, 4pm ET

• Stocks Issue December 18

• Free Lunch Stock Picks December 20

• January 2026 Almanac (Including “Pulse of the Market” & “Market at a Glance”) December 23

• Office Closed December 24 to January 1 

(Unless there is a major market or world event that warrants a Special Update)

• Santa Claus Rally reading January 5

• ETF Issue & First 5 Days reading January 8 

 

Our 2025 Forecast expressed concern about inflation, valuations and the older weak post-election patterns, but expected the bull market to continue through 2025. Though we anticipated a bumpier ride than the prior two years. The market sure hit some bumps early on with the DeepSeek scare in January and the Trump tariff tumble that drove the market into a near bear market correction from mid-February to the low on April 8 a week after the now notorious “Liberation Day.” The Dow dropped 16.1% from its January 30 high, S&P fell 18.9% from its February 19 high, NASDAQ plunged 23.9% from its February 19 high and the VIX volatility index spiked to 60 indicating maximum fear as the market put in the low for the year.

 

Turns out President Trump’s “Art of the Deal” was a bit disruptive. The market has been on a 7-month tear since the April low with another bump in November driven by mixed signals from the Fed on rates and a deleveraging in cryptocurrencies. But overall, the retraction of much of the tariffs, tax reductions and deregulation as well as the AI tech boom, drove stocks through resistance with the indexes (save the Russell 2000 until now) logging successive new highs all summer long into September and October. As we have pointed out when the market rises during bearish seasonal periods it’s a bullish indicator. 

 

Along the way we moved our outlook increasingly toward our 2025 Annual Forecast Best Case Scenario for above average gains of 12-20%. For the past few months, we have been expecting a Q4 rally to propel the S&P 500 to 7100 by yearend for another 20%+ annual gain. At today’s close we are only 2.9% below 7100 on the S&P 500. We expect more new highs across the board before yearend as the second half of December is historically bullish and the market has tracked the usual first half of December choppy mixed trading before the year-end rally.

 

Politics and personality aside the Trump administration, though more aggressive and disruptive than last time, has proven to be more experienced and effective than feared. Inflation remained contained and U.S. economy continued to register steady growth without overheating or stalling. Geopolitics, especially in the Mideast, cooled. As we had suggested in our Best-Case Scenario, 2025 has tracked more of a recent post-election pattern as the best year of the 4-year cycle since 1985. 

 

 

Base Case: 70% Probability – Some volatility, most likely in Q3 of 2026. Late 2026 rally in Q4 ultimately pushes the market to historical sixth year of presidential administrations gains for the year of around 8-12%. Inflation concerns linger but do not grow, the administration’s numerous policy changes deliver mixed yet positive results, new Fed chairman has seamless transition, and the labor market remains reasonably stable while the AI-fueled spending and development “Super Boom” continues.

 

Best Case: 10% Probability – Trump administration’s tariff, tax, immigration, and fiscal policy produce an acceleration of economic activity with limited collateral damage (volatility). Corporate profits continue to grow and estimates move steadily higher. Inflation expectations cool and it trends back towards the Fed’s 2% target. Labor market firms and begins adding 100k+ net new jobs monthly. President cements his legacy, his party retains control of Congress, and the market blasts higher. Full-year gains exceed 20%.

 

Worst Case: 20% Probability – An old-school, ugly and volatile midterm year. Policy flops, inflation surges, labor market briskly deteriorates, geopolitical hotspots flare, corporate earnings rollover and/or AI-stock valuations get reset. Mild bear market with economy teetering on recession. Negative to flat full-year performance with broad losses across asset classes.

 

 

We have updated our 4-Year Presidential Election Stock Market Cycle chart to include all the years from 1949 to 2024 compared to the current cycle so far. The short-lived, steep, tariff-driven correction earlier this year sure gives off a bearish vibe. While not an official bear market, it does seem to have reset the market, putting us in a quasi-new bull market scenario. It also likely pulls much of the usual midterm election bearish action forward, suggesting any 2026 midterm year weakness could be mild. The market clearly shrugged off many headwinds this year and while the magnitude was rather amplified 2025 did track the general seasonal trend of post-election years, especially the more bullish pattern since 1985, and is ending the year on high note.

 

 

So many market pundits have been commenting on how difficult midterm election years have been for the markets that it is unlikely it will be anywhere near as bad as the doomsayers warn. And while it’s true that overall midterm years are the worst year of the 4-year cycle, it is not the case for the second midterm year, especially second term republicans. 

 

The chart below of the S&P 500 Midterm Election Year Seasonal Pattern has been tweaked from what originally appears on page 10 of the 2026 Almanac. We stripped out all Republican Midterm Years for clarity since it’s not much different than All Midterm Election Years. But mostly it’s so we can focus on the patterns that are driving our Base Case Scenario: the more bullish 6th Year of Presidency and 2nd Republican Midterm Years patterns. Also of note, the STA Aggregate Cycle pattern (all years, all midterm years and 6th year of the decade) is right in there on the more bullish side.

 

As President Trump’s time in office truly begins to wind down in essence next year, as it does for all two-term presidents, 2026 and second midterm years in general are all about president’s cementing their legacy. Like it or not, Trump 2.0 has delivered on many of his promises, particularly regarding fiscal policies. The Big Beautiful Bill delivered tax reform, there has been a reduction in regulations, inflation is down, growth is up and the worst-case negative impact from tariffs has not materialized. 

 

Add that the Fed is clearly in an easing cycle. They have stopped quantitative tightening (QT) and reintroduced some quantitative easing (QE), for at least the short term, to shore up their balance sheet for yearend liquidity requirements. This means they are no longer letting bond holdings mature and roll off their balance sheet and instead buying treasuries and mortgage-backed securities, which recycles money into the system and generally stabilizes rates. 

 

 

 

After briefly turning negative in Q1, economic activity appears to be back on track with real Q2 GDP growth rebounding to 3.8% and although the Q3 GDP initial estimate has been delayed due to the federal government shutdown, the Atlanta Fed’s GDPNow model is forecasting 3.6% growth. Back-to-back quarters of respectable growth have pushed corporate profits to record highs. Turning 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 are still including the 2022 Q1 and Q2 recession we deem transpired based on the pre-Covid definition of two back-to-back negative quarters of GDP.

 

 

The lead horse of our Four Horsemen of the Economy is The Dow Jones Industrial Average. And while Papa Dow has modestly lagged the S&P and NASDAQ this year due to its lower exposure to technology it is still in a solid uptrend and closed at a new all-time high today. Today’s all-time high brings its total to 18 so far in 2025. More highs for Dow are likely in the historically strong second half of December.

 

Consumer Confidence is apparently on the rocks hitting its lowest level ever in a dataset that starts in 1960. This is puzzling given robust Thanksgiving holiday travel this year and record Black Friday/Cyber Monday spending. Inflation may be on everyone’s mind, but it does not seem to be curtailing consumer spending all that much. Larger expenditures are likely being delayed like a new auto or a house. For those that recall the gas lines, even/odd days, double-digit mortgage rates, and the ever-present threat of nuclear war, the current economic landscape does not seem all that bad. There are certainly many areas that need improvement, mainly affordability of food, housing, healthcare and education.

 

Looking at our inflation chart of the 6-month exponential moving average of CPI and PPI, consumer prices as measured by CPI appear to be leveling off at uncomfortable level at just under 3%, while producer prices (PPI) are trending higher. Part of this new trend higher in the PPI could be delayed impacts of higher tariffs and another source is likely surging electricity prices due to AI demand. This is a trend that warrants close attention.

 

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 be concerning. But for now, Unemployment Rate remains reasonably low and stable. Look at initial weekly claims data for early signs of trouble. Any persistent and steady increase there would likely lead to a higher unemployment rate.

 

 

Weekly, not seasonally adjusted claims data has spiked recently, but the current spike does not yet look any different than past spikes that have occurred near year end and continued into the following year. As long as weekly claims data remains in line with recent trends, we expect the labor market will hold up. However, any jump above recent yearly highs could potentially be an early warning sign.

 

 

It has been quite a bull run these past three years. We are on the precipice of another 20+% yearly gain for the S&P 500 – it is now up 93% since the October 2022 bear market low. But just because it’s been up so strongly three years in a row does not mean it must end. This AI spinning wheel looks like it has legs. From 1995 to 1998 S&P was up 20+% four years in a row and up 19.5% in the fifth year. Like the early days of the computer tech/internet boom of the mid-1990s the AI race is on. 

 

Midterm election year 2026 will be a pivotal year for the market, but it could also be another standout year. We expect the AI-fueled Super Boom to continue. The major players have made substantial investments and are likely to continue to pursue returns on their spending to date, no matter what the cost. Elevated valuations may give traders and investors reason to pause and consider, but the AI race is global, and no one wants to be left out or behind.

 

We await readings from our January Indicator Trifecta, page 20 of 2026 Almanac. Combining our Santa Claus Rally, First Five Days, and January Barometer into a single indicator has produced compelling results. The most bullish outcome has historically been when all three were positive. When all three are up the S&P 500 has been up 90.6% of the time, 29 of 32 years, with an average gain of 17.7%, and the next 11 months are up 87.5 % of the time, 28 of 32 years, with an average gain of 12.6%.

 

Happy Holidays & Happy New Year, we wish you all a healthy and prosperous 2026!

 

For those who were unable to attend the member’s only webinar on Tuesday before Thanksgiving, 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 along with an early look at how the market could fare in midterm-election year 2026.

 

Shortly after first half of December choppiness comes to an end, most likely just ahead of quarterly options expiration on Friday December 19th, 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 22. Around the same time, we will be looking for small-cap outperformance to accelerate in earnest, pages 112 and 114, followed by our Santa Claus Rally, the First Five Days of January and the full-month January Barometer. For now, we remain bullish as this is the seasonal favorable period for stocks. Valuations in some areas of the market are a concern, but economic data appears to be generally holding up, and the Fed is back on track for another interest rate cut next week.

 

 

November’s 0.13% gain by S&P 500 extended its consecutive winning month streak to seven straight months. The current monthly winning streak is the 17th time since 1949 that S&P 500 has accomplished this feat. Looking back at the previous 16 times, the S&P 500 was up seven months in a row, S&P 500 was also up in the eighth month 62.5% of the time with a median advance of 1.20% (average gain of 0.81%). When S&P 500 was up in the eighth month its average performance jumped to 3.14%. Performance 2-, 3-, and 6-months later was also positive. It is also notable that five S&P 500 monthly winning streaks ultimately went on to last nine or more months with three lasting an amazing eleven months.

 

 

Contrary to the thought that such streaks must be “stealing” from future performance, it is encouraging to see 3- and 6-month later performance are positive 87.5% of the time with average gains of 3.98% and 7.02% respectively. This does appear to bode well for the current “Best Months” with solid potential gains through April and/or May of next year. We will be looking for positive readings from our January Trifecta of indicators, Santa Claus Rally, First Five Days, and January Barometer to confirm.

 

 

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 11.18%, 10.16%, and 12.44% 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 produce and explore for 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 up to a buy limit of $88.10. Employ an initial stop loss of $77.75. Consider taking profits at the auto-sell price of $107.74. Exxon Mobil is the top holding in XLE at 23.21%. The next five holdings of XLE are Chevron, ConocoPhillips, Williams Companies, EOG and Marathon Petroleum. For tracking purposes, XLE will be added to the portfolio if it trades below its buy limit.

 

 

A second option that could also perform is SPDR S&P Oil & Gas Equipment & Services (XES). Domestic production and supplies of crude oil and natural gas are currently ample. But the current administration is pushing to bring even more supply to market. This could also lead to increased demand for oil & gas equipment and services. XES can be considered on dips below a buy limit of $80.05. If purchased, consider utilizing an initial stop loss at $70.64. For tracking purposes, XES will be added to the portfolio when it trades below its buy limit.

 

 

Historically this energy trade has either been a grand slam homerun or a bust. During the 2021-2022 seasonally favorable period, energy spiked higher after Russia invaded Ukraine and XLE quickly traded up to and through its auto-sell price for gains in excess of 25% in just a few months. In the next seasonal window during 2022 to 2023 energy prices fell and XLE was a bust. For 2023 to 2024 the trade produced a typical, modestly above average gain of 13% while last year it was a bust.

 

XLE and XES have been trending higher recently, but both are still lagging behind the broader market. The current administration has repeatedly and clearly stated it wants lower energy prices and that has been the trend for crude oil’s price. Analysts are also starting to lower their price estimates for crude oil next year even as the U.S. Department of Energy has announced contracts to put crude oil into the Strategic Petroleum Reserve (SPR).

 

Forecasts can be wrong and energy markets can change direction quickly, but it does appear it would require a significant disruption to crude supplies to produce a sustainable rally in crude’s price. Expectations for a meaningful rally in energy and energy stocks should be carefully considered and associated positions in XLE and XES may need additional monitoring. Headlines pertaining to a Russia/Ukraine cease fire or peace deal could move crude oil in either direction. 

 

 

In accordance with the October 30th, email Issue, Invesco CurrencyShares Euro (FXE) and Invesco CurrencyShares Swiss Franc (FXF) have been sold and closed out of the portfolio for modest gains of 2.6% and 2.7% respectively. As of today’s close, FXF is lower than the exit price in the portfolio while FXE is slightly higher. FXF has historically traded in rhythm with gold, as gold price stalled so did FXF. FXE has historically benefited from some strength near yearend, but it does look like the U.S. dollar has found its footing and is stabilizing in a new range thus limiting further meaningful gains.

 

SPDR Gold (GLD) is the best performing position in the portfolio up 26.4% as of its close on December 3. Historically, gold has generally reached a seasonal peak in late December or early in the New Year. Because this is a seasonal trade and not a long-term holding, the stop loss has been raised to $380 while we look to close out the position into strength. Sell GLD at $390 or higher.

 

At the opposite end of the performance spectrum is iShares Bitcoin (IBIT). Typical seasonal strength has not materialized, and Bitcoin has fallen sharply from its early October highs. The lows of March and April this year have held, and technical indicators are beginning to improve with relative strength and MACD improving. IBIT is on Hold with a tight stop loss at $52. 

 

Last Issue’s new trades in United States Copper (CPER) and Global X Copper Miners (COPX) have been added to the portfolio and are up 4.8% and 9.9% respectively. Demand for copper remains solid and its uptrend remains intact. CPER and COPX can be considered on dips. 

 

Invesco DB Agriculture (DBA) has been stuck in the mud. DBA holds a basket of agricultural commodities that can move in different directions resulting in flat performance. However, its two largest holdings, corn and live cattle, have historically exhibited strength from now into March and May respectively and both have been showing signs of strength recently. DBA is on Hold.

 

iShares DJ US Telecom (IYZ) is also on Hold. Seasonal strength in the sector has usually come to an end in late December. As of today’s close, IYZ is modestly positive and it could continue to trend modestly higher in anticipation of Fed interest rate cuts.

 

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 and stop losses have been adjusted, where applicable, for recent gains in the table below.

 

 

 

After closing out November with impressive weekly gains, the market is exhibiting some choppy trading here in the first week of December. This is not unusual following a brisk move nor is it unexpected as December’s typical seasonal pattern indicates. Based upon that pattern we are anticipating that once tax-loss selling abates, the market will likely resume its run higher 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.