EB Daily Market Report - Brief Update - Thursday, December 4, 2025
Hi All!
I've been a bit under the weather this week, so a couple things have been dropped or delayed, most notably the December Seasonality Report and my recorded show with StockCharts. The Seasonality Report should be done over the weekend, assuming that I feel better. The StockCharts video will likely be cancelled until next week.
To give you a little insight on December Seasonality, consider how the S&P 500 has traded since 1950. The odds of December closing higher than it started is better than any other calendar month as the S&P 500 has risen during December 55 times, while falling just 20. The next best calendar month, in that regard, is April, rising 53 times and falling 22. December 2025 is off to a good start as well.
During the month of December over the past 13 years (during this secular bull market), real estate (XLRE) has been the best sector, followed by consumer staples (XLP) and utilities (XLU). Clearly, money has tended to rotate towards more defensive- and value-oriented areas of the market. We've been seeing a bit of that in December 2025 as well.
Here's how the S&P 500 performance is broken down for the past 75 years:
December 1-8: +19.62%
December 9-15: -17.12%
December 16-18: +47.76%
December 19-20: -17.97%
December 21-31: +39.61% (Santa Claus Rally)
Another way to breakdown December performance on the S&P 500 is as follows:
December 1-15: +2.40%
December 16-31: +33.28%
As far as today's action goes, it's another solid day, but mostly for small caps (IWM, +1.16%). The IWM's all-time high was 252.77 on October 15th. Today's high, just a few moments ago, was 252.66. So small caps are on the verge of an all-time high. The likelihood of a fed funds rate cut at next week's Fed meeting is fueling the rise in small caps, no doubt. Other interest-rate sensitive areas like esuminregional banks (KRE, +0.66%) homebuilders (XHB, -0.95%), and transports ($TRAN, +0.46%) have followed small caps higher the past couple weeks, though the XHB is seeing some profit taking today.
My growth vs. value sustainability ratios continue to struggle as money seems to be continually rotating away from many large cap growth names. Perhaps the biggest question in the very near-term is this: Is technology (XLK) resuming its prior uptrend and leadership role or is this a bounce in a newly-developing downtrends. On the XLK's daily chart, its RSI dipped down close to 30, while it typically stays above 40 during uptrends. Currently, its RSI has rebounded to 56. 60 typically holds as resistance during downtrends.
As I stated earlier this week, I believe the U.S. stock market is as risky as it's been since February, just before its last significant top. That does not mean that a significant drop is guaranteed. Rather, it's an indication that the risks of such a drop have increased.
I'm prepared to see how this plays out.
Happy trading!
Tom