01/02/26
The S&P 500 ended 2025 with a 4th straight day of losses, so the beleaguered Santa Claus rally is in the red with two trading days left to try to avoid a 3rd straight year of losses during that 7-day trading period. It will have to close at 6910 or higher on Monday to do that, which is actually only about 1% from Wednesday's close.
Early January can be very hectic, and this year the first trading day is on a Friday sandwiched in between a holiday and a weekend, will make it another light volume, perhaps randomly volatile day.
As we saw at the end of December, the typically bullish seasonality of the start of January is not a guarantee, but the first two days of the year will have a chance to remedy what has shaped up into a potential third straight losing Santa Claus rally.
Tax loss selling 2025 losing positions in December may turn in to profit taking from 2025 winners in January as the capital gains get pushed out to the 2026 tax year (filed in April 2027.)
Here are the last three end of the old / start of the new year. All three started with a loss on the first day of trading. All three also ended the month with gains, but only after a bit of a rocky start.
January of 2022 was the previous year that had a gain on the first day of trading, but that turned out to be the peak for the month, so fading the first day's move has been working for the last several years.
So the moral is, if you don't like what you see on the first day or so of the month, wait a few days because it could easily change -- that's whether you're in stocks looking to get out, or out and looking for an opportunity to get in.
The S&P 500 (C-fund) was down sharply on Wednesday, but it seems to be doing the job of filling the open gap that we were pretty sure was going to be addressed again. There's plenty of support between 6835 and 6785, but it must hold to keep the bullish look alive. There is technically another open gap down by 6600, so the question is whether this inverted head and shoulders pattern needs to test the head again before eventually breaking out to new highs? Otherwise that inverted H&S is a very bullish looking pattern, with a target near 7100 if it can break out.
There are a lot of interesting chart patterns on the various index charts, and I am wondering if we can trust them being the start of a new year with all kinds of new strategies like tax selling, pension rebalancing, New Year's resolutions, etc., that can make the action seem random for a few days.
The Nasdaq 1000 large cap tech index has backed off from resistance and is now heading toward the support as it nears the apex of that pennant formation. 25,200 looks like solid support so if that fails, something is wrong.
The Dow Transportation Index still has that flat top look to it, and it has started to pull back from that as it begins to look like a bull flag, but you can see how far above its 50-day average this is now, and looking at a longer term chart...
... the Transports tend to snap back toward the average very quickly once the rally stalls, which it seems to be doing.
OK, I don't know how many of you made it here today, but thank you for being with us for another year! We appreciate it.
We wrapped another year in the AutoTracker and other contests. You can find the winners posted here...
2025 AutoTracker Winners | December AutoTracker Winners | Guess the Dow Contest Winner
To get on the AutoTracker for the full year in 2026, you must have account and an allocation set by 8PM ET tonight (Friday, Jan 2) and put "COB 12/31" in the comments line of the allocation input page. After that you won't be eligible for the 2026 yearly prizes, although subsequent monthly prizes will be available.
To remain active and eligible for prizes, you will need to log into the AutoTracker at least once every two months, or every 60 days, whether you make an allocation change or not. We have too many idle accounts that appear abandoned and we are trying to keep the list more clean.
DWCPF (S-fund) is in that right shoulder of an inverted head and shoulders pattern. It's not a deal breaker yet, but this really needs to get back above the 50-day average before the sharks smell blood in the water. The failed breakout and the pullback from the October peak for a second time does give this chart a concerning look, but that can be remedied by recapturing the 50-day average and holding.
ACWX (I-fund) looks better than the others, as it had all of 2025. The current pullback is normal inverted head and shoulders action after a breakout, but the bulls will want to see that 66.60 area hold on any further downside. There are a few open gaps below that could be targets, but due to the overnight trading in overseas markets, gaps are more common and a little more forgiven here.
BND (bonds / F-fund) has been dancing between the highs and the 50-day average for months. The head and shoulders pattern, complete with a failed head test and gap fill, makes me think this one wants to go lower. But until that support breaks, the bond bulls have a chance.
Thanks so much for reading! Have a great weekend!
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
The S&P 500 ended 2025 with a 4th straight day of losses, so the beleaguered Santa Claus rally is in the red with two trading days left to try to avoid a 3rd straight year of losses during that 7-day trading period. It will have to close at 6910 or higher on Monday to do that, which is actually only about 1% from Wednesday's close.
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Early January can be very hectic, and this year the first trading day is on a Friday sandwiched in between a holiday and a weekend, will make it another light volume, perhaps randomly volatile day.
As we saw at the end of December, the typically bullish seasonality of the start of January is not a guarantee, but the first two days of the year will have a chance to remedy what has shaped up into a potential third straight losing Santa Claus rally.
Tax loss selling 2025 losing positions in December may turn in to profit taking from 2025 winners in January as the capital gains get pushed out to the 2026 tax year (filed in April 2027.)
Here are the last three end of the old / start of the new year. All three started with a loss on the first day of trading. All three also ended the month with gains, but only after a bit of a rocky start.
January of 2022 was the previous year that had a gain on the first day of trading, but that turned out to be the peak for the month, so fading the first day's move has been working for the last several years.
So the moral is, if you don't like what you see on the first day or so of the month, wait a few days because it could easily change -- that's whether you're in stocks looking to get out, or out and looking for an opportunity to get in.
The S&P 500 (C-fund) was down sharply on Wednesday, but it seems to be doing the job of filling the open gap that we were pretty sure was going to be addressed again. There's plenty of support between 6835 and 6785, but it must hold to keep the bullish look alive. There is technically another open gap down by 6600, so the question is whether this inverted head and shoulders pattern needs to test the head again before eventually breaking out to new highs? Otherwise that inverted H&S is a very bullish looking pattern, with a target near 7100 if it can break out.
There are a lot of interesting chart patterns on the various index charts, and I am wondering if we can trust them being the start of a new year with all kinds of new strategies like tax selling, pension rebalancing, New Year's resolutions, etc., that can make the action seem random for a few days.
The Nasdaq 1000 large cap tech index has backed off from resistance and is now heading toward the support as it nears the apex of that pennant formation. 25,200 looks like solid support so if that fails, something is wrong.
The Dow Transportation Index still has that flat top look to it, and it has started to pull back from that as it begins to look like a bull flag, but you can see how far above its 50-day average this is now, and looking at a longer term chart...
... the Transports tend to snap back toward the average very quickly once the rally stalls, which it seems to be doing.
OK, I don't know how many of you made it here today, but thank you for being with us for another year! We appreciate it.
We wrapped another year in the AutoTracker and other contests. You can find the winners posted here...
2025 AutoTracker Winners | December AutoTracker Winners | Guess the Dow Contest Winner
To get on the AutoTracker for the full year in 2026, you must have account and an allocation set by 8PM ET tonight (Friday, Jan 2) and put "COB 12/31" in the comments line of the allocation input page. After that you won't be eligible for the 2026 yearly prizes, although subsequent monthly prizes will be available.
To remain active and eligible for prizes, you will need to log into the AutoTracker at least once every two months, or every 60 days, whether you make an allocation change or not. We have too many idle accounts that appear abandoned and we are trying to keep the list more clean.
DWCPF (S-fund) is in that right shoulder of an inverted head and shoulders pattern. It's not a deal breaker yet, but this really needs to get back above the 50-day average before the sharks smell blood in the water. The failed breakout and the pullback from the October peak for a second time does give this chart a concerning look, but that can be remedied by recapturing the 50-day average and holding.
ACWX (I-fund) looks better than the others, as it had all of 2025. The current pullback is normal inverted head and shoulders action after a breakout, but the bulls will want to see that 66.60 area hold on any further downside. There are a few open gaps below that could be targets, but due to the overnight trading in overseas markets, gaps are more common and a little more forgiven here.
BND (bonds / F-fund) has been dancing between the highs and the 50-day average for months. The head and shoulders pattern, complete with a failed head test and gap fill, makes me think this one wants to go lower. But until that support breaks, the bond bulls have a chance.
Thanks so much for reading! Have a great weekend!
Tom Crowley
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Questions, comments, or issues with today's commentary? We can discuss it in the Forum.
Daily Market Commentary Archives
For more info our other premium services, please go here... www.tsptalk.com/premiums.php
To get weekly or daily notifications when we post new commentary, sign up HERE.
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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