Market Monitor December 18

Highlights

A Christmas rally on Wall Street failed after the Federal Reserve warned that there would be limited room for rate cuts in 2025 (two instead of four).

This led to significant losses: the Dow Jones closed 2.6% lower, and the Nasdaq dropped 3.6%.

Nvidia, a key player in AI chips, saw earlier gains disappear and ended slightly lower, while competitor Broadcom also lost ground due to profit-taking.

Major Index Performance:

SPY (S&P 500 ETF):

• Down 3% in the last session.
• Short-term trend: Weak, with a 1-week decline of -3.49% but a longer-term trend remains up with a 12-month gain of 23.78%.

QQQ (Nasdaq 100 ETF):

Down 3.6% in the last session.

• 1-week trend: -3.52%, but still showing strong performance on a 12-month basis (+26.47%).

IWM (Russell 2000 ETF):

• The biggest drop of the three, down 4.4% in the last session.
• Significant short-term weakness with a -7.12% 1-week trend. Its long-term trend remains up, with a 12-month increase of 9.61%.

Sector Performance:

1 Week:

• All sectors, except Information Technology, showed negative performance.
• Worst-performing sectors: Materials, Health Care and Energy
• Information Technology slightly outperformed other sectors but still struggled.

1 Month:

• Energy and Materials led the underperformers, while Information Technology and Consumer Discretionary showed some resilience.

All info available on our Sector Performance page

Historical Breadth Numbers:

Advancers vs. Decliners:

• On December 18, only 7.3% of stocks advanced, while a massive 91.6% declined, indicating broad market weakness.

Breadth metrics (e.g., SMA levels and new highs/lows) confirm a very bearish sentiment:

• Only 14.4% of stocks are trading above their 20-day SMA.
• A very low percentage of stocks are above their 50-day, 100-day, and 200-day SMAs (26.3%, 38.7%, and 44%, respectively).
• New highs were virtually absent, while new lows spiked to 16.2%.

Summary of Breadth Trends:

• Short-term breadth is deteriorating, with declining stocks heavily outpacing advancing ones.
• The bearish breadth was consistent across the past week, indicating increasing weakness in the overall market.

All info available on our Market Monitor page

Conclusion:

The December 18 session was marked by a sharp sell-off, with the Dow, Nasdaq, and Russell 2000 taking significant hits.

The breadth data reflects an overwhelmingly bearish market environment, with extremely low advancing stocks and a significant number of stocks below key moving averages.

This suggests a cautious market outlook in the short term, with further potential downside unless a positive catalyst emerges.