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Factors Behind the Dow Slump The Dow Jones Industrial Average has fallen for nine consecutive days, marking its longest losing streak since 1978. This downturn has caught many investors off guard, particularly after the strong postelection rally that drove stocks to record highs. While the S&P 500 and Nasdaq Composite remain near their peak levels, the Dow has struggled. On Tuesday, it closed below its 50-day moving average for the first time since the November election, raising concerns about its underlying momentum. What’s Driving the Decline? Weak Market Breadth The Dow’s challenges reflect a broader trend across the market. Since early December, previously strong sectors have faltered, and investors have shifted back to Big Tech and semiconductor stocks like Broadcom Inc. In contrast, value-focused sectors such as small caps and financials have underperformed. Financials in the S&P 500 have dropped 4.4% this month, with utilities and energy performing even worse. While tech leaders have supported the S&P 500 and Nasdaq Composite, the Dow’s narrower composition has made it more vulnerable to sector-specific weakness. Market breadth has also been a concern. For 12 consecutive trading days, more S&P 500 stocks have declined than advanced, setting a record since at least 1999. Only 40.6% of S&P 500 stocks are currently trading above their 50-day moving averages, the lowest level since May. Individual Stock Pressures Much of the Dow’s recent losses can be attributed to one company: UnitedHealth Group Inc. Since the losing streak began, UnitedHealth has contributed 750 points to the Dow’s 1,564-point decline, accounting for nearly half of the drop. The company has faced pressure from congressional scrutiny over its pharmacy benefit manager business and negative headlines related to the death of a top executive. Other laggards dragging down the index include Sherwin-Williams Co., Caterpillar Inc., and Goldman Sachs Group Inc. Rising Treasury Yields Another factor weighing on the market is rising Treasury yields. The 10-year Treasury yield has climbed 20 basis points this month to 4.397%, fueled by concerns that the Federal Reserve may pause its interest rate cuts and that inflation could remain elevated. Higher yields have particularly impacted the equal-weighted S&P 500, which has significantly underperformed its market-cap-weighted counterpart this month. Outlook for Investors Despite the Dow’s recent struggles, there are reasons for optimism. The U.S. economy is on track to grow at over 3% in the third quarter, and corporate earnings forecasts for next year remain robust. According to Mona Mahajan, a senior investment strategist at Edward Jones, lagging sectors like small caps and value stocks may rebound due to their attractive valuations. However, a broader market recovery may depend on interest rates stabilizing and inflation remaining under control. As the Federal Reserve prepares to announce its next rate decision and economic projections, investors will be watching closely for signals about future policy moves and market direction. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Deutsche Bank Research: Shifting Market Risks for 2025 Investor concerns about market stability have shifted significantly heading into 2025, with a potential global trade war now viewed as the top risk, according to Deutsche Bank Research. This marks a departure from last year when a U.S. economic “hard landing” was the most cited concern. “The leading global risks are a potential trade war, a sharp decline in the U.S. tech sector, and renewed inflationary pressures,” said Jim Reid, Deutsche Bank’s global head of macro and thematic research, in a Monday note. The report highlights how investor sentiment has evolved over the past year. Trade War Concerns and Inflation Risks While the U.S. economy expanded in 2024 despite fears of a recession, investor focus has turned to the implications of new tariffs under President-elect Donald Trump’s trade policies. A rise in tariffs could exacerbate inflation, which remains a lingering concern despite the Federal Reserve’s shift toward looser monetary policy in September. Deutsche Bank’s research also shows that investors remain wary of potential surprises from central banks, including unexpected rate hikes to combat inflation. Bond market volatility has heightened these concerns, with the 10-year Treasury yield climbing to 4.397% on Monday, its elevated levels raising the specter of destabilizing effects on equity markets. Tech Stocks and AI Momentum at Risk A sharp drop in tech stock valuations ranks as the second-largest market risk heading into 2025. Tech stocks have led the market rally in 2024, driven by enthusiasm for artificial intelligence. For instance, Nvidia’s stock has soared over 166%, and the Nasdaq Composite has gained 34.4% year-to-date. Additionally, the Roundhill Magnificent Seven ETF, which includes major tech firms, is up 73.2% for the year, per FactSet data. However, investors are concerned that waning AI-driven enthusiasm could trigger a correction in the tech sector, which has an outsized influence on broader market performance. Outlook for 2025 Despite these risks, Deutsche Bank’s survey reveals cautious optimism for 2025. Investors project a 5.2% gain for the S&P 500 and a 6.8% increase for the Magnificent Seven stocks. Still, the specter of geopolitical tensions, inflationary pressures, and central bank policy uncertainty could weigh heavily on markets. As the Federal Reserve prepares to announce its latest interest rate decision on Wednesday, market participants are closely watching for signals about the trajectory of monetary policy. With 2024 delivering strong equity gains—the S&P 500 is up 27.3% year-to-date—investors remain vigilant about emerging risks that could shape the market landscape in the year ahead. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Wall Street’s festive cheer appears muted as the stock market rally takes a breather ahead of the Federal Reserve’s final policy meeting of 2024. Hopes for a December surge driven by tech stocks have dimmed, raising concerns about market fragility. The S&P 500 Value Index (SPYV) extended its record losing streak, while the Dow Jones Industrial Average (DJIA) posted its seventh consecutive daily loss on Friday—the longest stretch since February 2020. “I would love to see a meaningful pullback in equities,” said Talley Leger, chief market strategist at the Wealth Consulting Group. While Leger expects the typical year-end boost from holiday spending, he predicts some market turbulence could emerge in 2025. The S&P 500 (SPX) closed flat on Friday but remains poised to achieve back-to-back annual gains exceeding 20% for 2023 and 2024, defying earlier fears of a recession. However, this bull market has avoided pullbacks of at least 15% since October 2022, a rarity according to Dow Jones Market Data. David Laut, chief investment officer at Abound Financial, compared today’s market euphoria to the iconic “Titanic” scene where arms are outstretched at the bow. Despite strong investor sentiment, Laut sees growing risks, including inflation, disappointing earnings, and geopolitical tensions. “Why not take some money off the table?” he suggested, highlighting a shift toward mid- and small-cap stocks, emerging markets, and cash reserves. Laut also recommends a 5% allocation to gold and cryptocurrencies as part of a diversified strategy. The ‘Magnificent Seven’ FactorOne major concern is the outsized influence of megacap technology stocks, known as the “Magnificent Seven.” For every dollar invested in the SPDR S&P 500 ETF Trust (SPY), 31 cents are allocated to these stocks. Laut advocates for a more balanced approach heading into 2025, focusing on undervalued opportunities beyond large-cap tech. Parallels to the 1990s The Fed is expected to announce a 25-basis-point rate cut on Wednesday, but Chair Jerome Powell’s cautious tone suggests a slower pace of easing in 2025. Talley Leger draws comparisons to the mid-1990s, a period marked by robust economic growth and the early stages of the tech boom. “This feels a lot like the run-up to tech mania 1.0,” said Leger, emphasizing the importance of navigating inflation risks. Higher bond yields add complexity to the outlook. The 10-year Treasury yield climbed significantly last week, reflecting concerns that inflation may not cool as quickly as anticipated. George Cipolloni, portfolio manager at Penn Mutual Asset Management, warned, “The market wants easing, but yields remain a challenge. Lower yields would help, but getting there won’t be easy.” What’s Next? The Fed’s rate decision on Wednesday will be the centerpiece of a busy week that includes November’s PCE inflation data on Friday. Other key economic reports, including updates on manufacturing, retail sales, and housing starts, will provide further insights. Despite recent setbacks, 2024 has been a strong year for equities. The Dow is up 16.3%, the S&P 500 has gained 27%, and the Nasdaq has surged 32.7%, according to FactSet. As investors look to 2025, the focus shifts to navigating market uncertainty while capitalizing on new opportunities. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

S&P 500 Sees Nine Straight Sessions of Weak Breadth, a Rare Market Phenomenon The U.S. stock market is experiencing a rare stretch of “bad breadth,” where more stocks are declining than advancing, even as the S&P 500 continues to climb. For nine consecutive sessions, the number of falling stocks in the index has surpassed those rising—a pattern not seen in over two decades, according to BTIG technical strategist Jonathan Krinsky. Market breadth, a key measure of market health, has deteriorated sharply since early December. This anomaly, last observed during the period around September 11, 2001, contrasts with the S&P 500’s modest 0.4% gain so far this month, driven by strong performances from megacap technology stocks, including the so-called “Magnificent Seven.” However, this narrow leadership is raising concerns about the sustainability of the rally. Broader market measures highlight the underlying weakness. The Invesco S&P 500 Equal Weight ETF (RSP), which assigns equal importance to all stocks in the index, has declined 2.5% in December. On Thursday, it marked its ninth consecutive loss, the longest streak since December 2018, when markets were reeling from a significant selloff. Historically, such weak breadth has been associated with markets trading well below record highs. Jason Goepfert, senior research analyst at SentimenTrader, notes that similar instances over the past 70 years typically occurred with the S&P 500 12% below its peak. Yet, as of Thursday, the index was just 0.6% off its record close of 6,090.27, making this situation unprecedented. This poor breadth is impacting various market segments. Value stocks, tracked by the S&P 500 Value Index (SPYV), have fallen for nine straight sessions, their worst losing streak since 2000. Momentum-driven growth stocks, such as Palantir Technologies Inc. and AppLovin Corp., have also struggled to recover, further reflecting the uneven market environment. Analysts, including Krinsky, caution that this trend could lead to heightened volatility in early 2024, as investors lock in gains from the current rally. Despite this, the S&P 500 remains on track to deliver a total return exceeding 25% in 2024, which would mark back-to-back years of such strong performance for the first time since the late 1990s. On Thursday, U.S. stocks closed lower across the board. The S&P 500 fell 0.5% to 6,051.25, the Nasdaq Composite lost 0.7% to finish at 19,902, and the Dow Jones Industrial Average declined 0.5% to close at 43,914.12. Investors are now watching closely to see if broader participation can return to the market or if this narrow rally will give way to further weakness. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Profit-Taking or Staying the Course: What’s Next for Stock Investors? The Nasdaq Composite hit a historic milestone on Wednesday, closing above 20,000 for the first time. This surge was powered by a rally in tech giants like Alphabet Inc. (GOOGL, GOOG) and Meta Platforms Inc. (META), which reached record highs, pushing the Nasdaq up 1.77%. Richard Steinberg, chief market strategist at The Colony Group, cautioned that the recent gains might come at a cost to future returns, comparing the rally to “borrowing from Peter to pay Paul.” Historically, U.S. stocks perform well in December, especially during the “Santa Claus rally” period starting December 24. However, with the Nasdaq already up 4.3% this month, investors appear eager to act sooner, according to FactSet data. Steinberg warns that a year-end tech rally could reduce momentum in early 2025. Elevated 10-year Treasury yields, a stronger dollar tied to Trump’s “America First” policies, and potential fiscal concerns could challenge growth stocks in the new year. He suggests that investors consider rebalancing portfolios to avoid excessive exposure to equities. The Case for Staying the Course While some advocate for caution, others believe in sticking with strategies that have proven successful. Keith Lerner, co-chief investment officer at Truist Advisory Services, emphasized the enduring strength of the AI theme, which continues to drive the bull market. Despite political uncertainties, Lerner sees strong earnings expectations for technology stocks, which he argues are far from overvalued. Callie Cox, chief market strategist at Ritholtz Wealth Management, views the Nasdaq’s 20,000 milestone as a psychological boost, reflecting tech’s resilience despite high interest rates. However, she warned against overemphasizing round-number markers, noting they often oversimplify complex market dynamics. Looking Ahead As 2025 approaches, investors face a pivotal choice: lock in profits or remain invested in the strategies that have propelled markets to new highs. While challenges like elevated interest rates and fiscal uncertainties persist, the tech sector’s strong earnings potential and growth themes could sustain its appeal into the new year. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

November CPI Could Upend December Rate Cut Expectations Traders in fed-funds futures currently place an 85% chance on the Federal Reserve cutting rates by 25 basis points at its December policy meeting. This level of confidence aligns with historical norms during the Fed’s “blackout” period, when officials refrain from public comments on monetary policy ahead of a meeting. As of Tuesday, market expectations for a December rate cut remain steady, supported by data from the CME FedWatch Tool. This optimism has fueled a strong stock market rally, with the S&P 500 and Nasdaq Composite reaching record highs last week and the Dow Jones Industrial Average crossing the 45,000 milestone for the first time. Inflation Data Looms as a Potential Game-Changer This week’s release of the November consumer price index (CPI) on Wednesday and producer price index (PPI) on Thursday could still shift market sentiment. Economists surveyed by The Wall Street Journal expect CPI to rise by 0.3% month-over-month for both headline and core readings. Year-over-year, headline inflation is forecasted to tick up to 2.7% from 2.6% in October, with core inflation steady at 3.3%. A sharper-than-expected increase in CPI—such as a 0.4% monthly gain—could raise questions about the Fed’s plans, said Jay Hatfield, CEO of Infrastructure Capital Advisors. However, most analysts see little likelihood of such an outcome, given policymakers’ confidence that inflation is on track toward the 2% target. Fed’s Gradual Approach and Market Sentiment Minutes from the Fed’s November meeting highlighted officials’ preference for a more measured pace of rate cuts, with Chair Jerome Powell emphasizing the importance of avoiding undue haste. Although a December rate cut appears likely, the Fed may strike a “hawkish” tone, signaling slower rate reductions in the future. Recent economic data has bolstered expectations for a December easing. November’s stronger-than-expected jobs report reinforced this view, and remarks from Fed officials, including Powell and Governor Christopher Waller, have not challenged the market’s outlook. Waller, in particular, indicated he supports a rate cut unless inflation data surprises significantly. The Role of the Dot Plot The December meeting will also include an updated Summary of Economic Projections, known as the dot plot, which outlines individual Fed officials’ rate forecasts. A projection showing only modest rate cuts in 2024 could help balance the more hawkish voices within the central bank, according to Hatfield. Key Takeaways With inflation data as the final major input before the December meeting, the market is poised for a rate cut. However, any significant surprise in the CPI could disrupt these expectations, underscoring the Fed’s delicate balancing act as it navigates its monetary policy path. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com