Are Stocks at a Turning Point?

We hope you and your family had a happy and joyous holiday. Stocks ended last week down, continuing a slide that began before the New Year. One obvious question arises: Does this decline signal a turning point for stocks? 

We don’t think so,” responded Fundstrat Head of Research Tom Lee. In his view, the tailwinds that helped 2024 gain more than 20% for a second straight year remain in place. In fact, those tailwinds “are arguably stronger in 2025 than they were in 2024,” he told us.

In the near term, Lee acknowledged that 2024 “ended on a whimper,” but historical precedent suggests that this lackluster year-end could set up a strong January. The last trading week of 2024 saw four straight daily declines, and when the Fundstrat Data Science team looked at historically similar precedents, they found reason for constructiveness.

Since 1928, there have been 10 previous instances of three or more consecutive daily declines in the final trading week of the year. Stocks were up one month later 80% of the time, with a median gain of 3.6%. Looking further out, stocks were up 12 months later 80% of the time as well, with median gains of 12.4%. That doesn’t mean this coming week will necessarily see a bounce, however. Fundstrat Head of Technical Strategy Mark Newton observed that “while I expect that this consolidation should be complete by mid-January, it’s hard to claim technically just yet that lows are in place.”

To Lee, this means that a continued pullback might be possible, but that would represent a buying opportunity. “Buying the dip continues to make sense, in our view,” he concluded. 

Are Stocks at a Turning Point?

Chart of the Week

This year, a longer-term tailwind could come in the form of the ISM Manufacturing PMI. The December reading came out on Friday, reaching a nine-month high. This is a metric Lee and his team are closely monitoring. “ISM manufacturing has been below 50 for 26 months (since Oct 2022), and we think it is set to rise above 50 in 2025,” Lee said, with the Federal Reserve in an easing cycle and an incoming White House that is seen as business-friendly. “As we’ve noted in the past, ISM Manufacturing tends to lead S&P 500 PS growth rates by roughly four months,” so “we would see a recovery in ISM to above the 50 mark as a signal for improving EPS growth.” This can be seen in our Chart of the Week.

Recent ⚡ FlashInsights

One quick update on TSLA 8.84%  – The stock’s short-term pattern turned more negative on the violation of $415.41 this past Tuesday (New Year’s Eve) and today’s Q4 deliveries missed consensus and their 1st Quarter sales drop of 1.1% marks the first annual EV sales decline in a nearly a decade. While this brought about an “open-gap” this morning, this decline also appears short-term in nature and will make TSLA attractive if/when this reaches its 50% retracement level near 350 (which cannot be ruled out) My technical expectation is for a drop to $344-$362 before this bottoms which would make TSLA an appealing risk/reward for buying dips. Thus, similar to SPX, this has pulled back in an ABC-type pattern, while its larger trends and momentum remain quite bullish. Overall, I expect a bit more weakness over the next 4-6 trading days ahead of a possible low, and patience here is also needed in the short term, as lows do not yet seem to be in place.
Jan 2 · 11:53 AM
This daily ^SPX 1.25%  chart helps to put this recent consolidation in US Equities into perspective. While the intermediate-term SPX uptrend intersects near 5700, the short-term trends and momentum are still negative. Key levels for today into tomorrow’s close lie at resistance ranges at 5945-68 for SPX on the upside and 5832-5868 on the downside. Any break of this week’s lows at 5868.86 should result in mid-December’s lows being tested at 5832. If this level breaks (which is a distinct possibility) then it’s likely that SPX 12/6-12/20 decline should be approximated in both time and price before bottoming, ultimately forming an ABC-type pattern over the next week. The good news for the “bulls” is that downside likely should not prove too extreme in either price or time before bottoming, and my downside area of stronger support lies at the 5650-5700 area. Overall, patience is required, but this ultimately should bring in buying opportunities sooner than later as fear should most certainly escalate if/when December lows at 5832.30 (SPX) are violated.
Jan 2 · 11:52 AM
BTC Bitcoin has also broken 12/20 lows as of today, $92118, which constitutes a violation of the entire support since early November. (Recall that cycles called for BTC to peak in mid-December and potentially suffer a short-term correction in the 1st Quarter of 2025, bottoming in March) Given that the cycles seemed to peak “on-time”, i have no reason to expect the trajectory for a further correction would be incorrect. Furthermore, a break of 92,118 on a daily close would allow for initially a pullback to $83k, which would roughly approximate the length of the first move down from $108k when measured from 12/26 peaks. Overall, the key point here is that a breakdown of $92.118 is a near-term negative development for BTC and would allow for at least a move down to 83k initially before much stabilization.
Dec 30 · 12:29 PM

FSI Video: Weekly Highlight

Are Stocks at a Turning Point?

Key incoming data

  • 12/30 10:30 AM ET: Dec Dallas Fed Manuf. Activity Survey Tame
  • 12/31 9:00 AM ET: Oct S&P CoreLogic CS home price Tame
  • 1/2 9:45 AM ET: Dec F S&P Global Manufacturing PMI Tame
  • 1/3 10:00 AM ET: Dec ISM Manufacturing PMI Tame
  • 1/6 9:45 AM ET: Dec F S&P Global Services PMI
  • 1/6 10:00 AM ET: Nov F Durable Goods Orders
  • 1/7 8:30 AM ET: Nov Trade Balance
  • 1/7 10:00 AM ET: Dec ISM Services PMI
  • 1/7 10:00 AM ET: Nov JOLTS Job Openings
  • 1/8 9:00 AM ET: Dec F Manheim Used vehicle index
  • 1/8 2:00 PM ET: Dec FOMC Meeting Minutes
  • 1/10 8:30 AM ET: Dec Non-Farm Payrolls
  • 1/10 10:00 AM ET: Jan P U. Mich. Sentiment and Inflation Expectation
Are Stocks at a Turning Point?

Stock List Performance

Are Stocks at a Turning Point?
Are Stocks at a Turning Point?

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