Market Insights: Monday, January 5th, 2026

Market Overview
US stocks opened the first full trading week of 2026 with strong gains as a surge in energy stocks, renewed optimism around AI demand, and easing pressure in rates combined to fuel a broad-based rally. The Dow Jones Industrial Average jumped roughly 1.2%, briefly pushing above the 49,000 level for the first time, while the S&P 500 and Nasdaq each gained about 0.6%, reflecting balanced participation across cyclical and growth-oriented sectors. Markets reacted to a dramatic geopolitical development over the weekend, as US military action in Venezuela and the capture of President Nicolás Maduro lifted energy names on expectations that US oil majors could benefit from the rebuilding of Venezuela’s energy infrastructure under a more US-aligned framework. While the headlines were significant, investors largely downplayed longer-term economic fallout and instead focused on the immediate implications for oil supply, infrastructure spending, and US corporate access to the region. Energy stocks surged across the board, helping drive the Dow’s outperformance, while financials, consumer discretionary, and industrials also posted strong gains to start the year. At the same time, optimism around AI demand returned to the forefront as upbeat developments from Nvidia’s supply chain and strong results from key Asian manufacturers reinforced confidence that AI investment remains intact heading into 2026. Gold and the US dollar both moved higher as traders weighed geopolitical risk, while Treasury yields eased, with the 10-year hovering near 4.15%, providing a supportive backdrop for equities. With CES week underway and Nvidia’s CEO set to headline the marquee tech conference in Las Vegas, markets are entering the new year with renewed enthusiasm for both cyclical reopening themes and longer-term structural growth tied to AI, even as investors remain mindful that a heavier flow of economic data later this week could quickly reshape sentiment.

SPY Performance
SPY posted a strong start to the year, opening at $686.42 and trending higher through the session to an intraday high of $689.43 before closing at $687.70, up 0.66% on the day. Trading volume came in at 66.14 million shares, about average, signaling healthy participation without signs of speculative excess. Price never meaningfully tested the $685 level that has defined bull control in recent weeks, reinforcing the idea that buyers remain firmly in command above that threshold. After reaching the highs late morning, some profit-taking set in and SPY drifted modestly lower into the close, but the pullback was orderly and shallow. Holding above $685 into the close keeps the breakout from the prior range intact and positions SPY for a potential run at the all-time highs as January unfolds.

Major Indices Performance
Monday’s gains were broad and decisive across the major indices. The Dow led with a 1.23% surge, driven by strength in energy, financials, and industrials. The Nasdaq advanced 0.69% as AI-related names regained momentum, while the S&P 500 added 0.66%, reflecting balanced sector participation. The Russell 2000 outperformed with a 1.59% gain, signaling renewed confidence in smaller-cap names as risk appetite improved and financial conditions remained supportive. The combination of cyclical leadership and steady tech participation suggested a healthy start to the year rather than a narrow, speculative rally.

Notable Stock Movements
It was one of the strongest sessions in recent weeks for the Magnificent Seven, with most names finishing solidly in the green. Tesla stood out as the top performer, rallying as much as 3.10% and leading megacap gains. Broad strength across the group reflected renewed confidence in growth leadership, though Microsoft, Apple, and Nvidia lagged modestly relative to their peers. Outside of megacaps, energy stocks dominated headlines as Chevron surged more than 5% and Halliburton jumped over 8%, while refiners such as Valero and Marathon Petroleum posted some of their largest single-day gains in months. Semiconductor and AI-related stocks also benefited from improving sentiment tied to strong demand signals heading into CES week.

Commodity and Cryptocurrency Updates
Commodities delivered powerful confirmation of the day’s risk-on and geopolitical narrative. Crude oil surged 1.88% to $58.40, continuing the rebound our model has been forecasting for several months. While further downside remains possible, sustained trade above $56 keeps the door open for a move toward $60 and potentially $70 if supply dynamics tighten. Gold jumped 2.96% to $4,457, extending its historic rally as investors sought protection against geopolitical uncertainty and long-term inflation risks. Bitcoin surged 3.09% to close above $94,000, reversing its late-December slide and signaling renewed appetite for risk assets in the digital space.

Treasury Yield Information
The 10-year Treasury yield fell 0.93% to close near 4.152%, easing pressure on equity valuations and helping support Monday’s rally. In our framework, yields above 4.5% begin to create headwinds for stocks, while moves above 4.8% and especially above 5% typically coincide with sharper equity selloffs. At 5.2%, our model suggests the probability of a 20% or greater correction rises meaningfully. Monday’s decline in yields reinforced the supportive macro backdrop and helped keep the focus on growth and earnings rather than funding stress.

Previous Day’s Forecast Analysis
In the final newsletter of 2025, we emphasized that as long as SPY held above $685, the bulls would retain control and the path toward new highs in early January would remain open. We highlighted the importance of monitoring geopolitical catalysts and energy markets, while noting that thin holiday liquidity could give way to stronger directional moves once normal participation returned in the new year.

Market Performance vs. Forecast
Monday’s action aligned well with that framework. SPY opened above $686, never tested $685, and pushed higher into the $689 area before consolidating. The ability to hold firmly above the prior range confirmed that the breakout remains valid and that bulls entered 2026 with clear control of the tape.

Premarket Analysis Summary
In Monday’s premarket notes published at 7:09 AM, SPY was trading near $685.31 with a bias level at $685.50. We outlined upside targets at $686.50 and $688 while noting that losing the bias would likely trigger consolidation toward $683.50 and $683. Price action followed the bullish path, with SPY holding above the bias and grinding higher through the morning.

Validation of the Analysis
The intraday tape validated the premarket plan cleanly. SPY held above $685.50, advanced toward $688, and extended to $689.43 before profit-taking set in. The absence of any meaningful test of downside targets underscored the strength of the bullish structure.

Looking Ahead
Looking ahead, markets will begin to digest a more normal flow of economic data after the holiday lull. Tuesday brings JOLTS, Wednesday has ADP and ISM, Thursday features Unemployment Claims, and Friday culminates with Average Hourly Earnings, Non-Farm Employment Change, the Unemployment Rate, and University of Michigan sentiment. These reports will shape expectations for growth, inflation, and the Fed’s policy path early in 2026.

Market Sentiment and Key Levels
Sentiment has turned decisively bullish to start the year. SPY’s close near $687.70 places it firmly above the $685 level that defines bull control. Resistance now sits at $688, $690, and $692, while support rests at $686, $683, and $680. Holding above $685 keeps the path open for a test of the all-time highs, while a break below $683 would be the first signal that momentum is fading.

Expected Price Action
Our model projects SPY’s maximum range for Tuesday between $684 and $692, with the Call side dominating in a narrow band that signals choppy but upward-biased action. As long as SPY holds above $685, the bulls are expected to continue probing higher, though progress toward $692 is likely to be slow and measured rather than explosive.

Trading Strategy
With the new year underway and participation returning, we favor staying aligned with the bullish structure while respecting resistance near the highs. Long setups near $687 down to $684 remain attractive as long as support holds, while failed breakouts near $691–$692 offer tactical short opportunities. Position sizing should remain disciplined as the market digests a heavy week of data.

Model’s Projected Range

SPY’s projected maximum range for Tuesday is $684 to $692, with the Call side dominating in a narrow band that signals choppy action. SPY rallied 0.67% to close at $687.72, firmly above the $685 level that defines bull control. Volume was average, confirming participation but not excess enthusiasm. Overnight the bulls reversed the holiday week slide with a gap up and a rally into the open. As we have stated for weeks, above $685 the bulls control the tape, and today followed that script. SPY opened above $686.50 and never tested $685. Price ground higher through the morning on low volume and reached a high of $689.43. Profit taking then set in and prices drifted lower through the afternoon. Despite the pullback, SPY held above $685 into the close, keeping the bulls firmly in control. It is still too early to confirm a permanent break from the $675 to $685 range, but today’s close above $685 positions the market for a January run at the all-time highs. Overnight the bulls are expected to defend $685 to preserve momentum. A failure at $685 opens $683, and a break below $683 brings Friday’s low near $680 into play. A move below $680 would give the bears a chance to press for deeper downside. Holding above $683 keeps the path open for a test of the all-time highs near $692, where the first and possibly second attempts are likely to meet resistance. The move from $687 to $692 is expected to be slow and choppy rather than explosive. With price above $685, SPY has broken out of the prior range and is likely to grind higher in January absent an external catalyst. The bears have little influence unless price falls below $680, while the broader bull market remains intact above $640. Traders should monitor geopolitical headlines, developments around Venezuela, Friday’s jobs report, and the risk of a government shutdown at month end. Absent a catalyst, resistance for Tuesday sits at $688, $690, and $691, while support sits at $686, $683, and $680. We favor shorts near $691 and longs near $687 down to $684. Crypto reversed its slide and rallied back into the mid $90s, while most MAG stocks advanced except Apple and Nvidia. Sustained weakness across both groups would be required for a meaningful pullback. VIX rose 2.69% to 14.90, supporting risk-on conditions, with SPY closing in the lower third of its bull channel from the April lows and structural support near $678. 

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI ended the session in a narrow, Bullish Trending Market State with SPY closing well above MSI resistance turned support. There were no extended targets into the close, but they were present in the premarket as well as the bulk of the morning session. The MSI rescaled higher overnight from a bearish state to its current narrow bullish state. Without additional rescalings higher, or a widening of the range, the MSI is forecasting a slow grind up rather than an explosive move to new highs. Support is at $685.28 and lower at $684.44.
Key Levels and Market Movements:
We did not publish a newsletter during the holiday, however on Tuesday, December 23rd we stated, “The MSI forecasts higher prices with a likely run at the all-time highs. The move is expected to be slow, choppy, and directional,” and noted, “There is no meaningful bear case unless price falls below $680,” while also adding, “Any test of $690 is a strong short candidate on a failed breakout, but we continue to favor longs off support as dips are likely to be bought into the new year.” With this context, and with the MSI opening in a narrow bullish state above $685 with extended targets printing, we looked for an early long entry. There was little structure to lean on, so we sat on our hands through the morning waiting for SPY to reach $690 and fail. A textbook failed breakout at 11:48 am had us eager to short, but with extended targets still printing we waited. Once extended targets stopped printing, we entered short at $689 just before noon. We set T1 at the premarket level of $688 and T2 at $686.50. T1 was hit at 1:20 pm and we continued to hold. SPY then pushed back toward our entry, reaching $688.70, raising the risk of being stopped on the remaining 30% of the position. A double top at that level gave us confidence to hold and to reload short at $688.60 at 2 pm. By 2:20 pm price fell to $687.30, but a less than perfect failed breakdown combined with an MSI that was fixed long led us to scalp the trade rather than risk profits already secured. We exited the position in full with a small $1 gain on the second entry and called it a day. We view today as a victory given the success we had on a countertrend trade in a strong up market, thanks once again to having a clear plan, maintaining patience and discipline, and staying aligned with MSI signals, market structure, and our broader trading framework. The MSI continues to prove its reliability as the cornerstone of our trading process.
Trading Strategy Based on MSI:
Tuesday has no scheduled news, but given the macro risks still present, traders should be prepared for sudden moves. The projected range for tomorrow is extremely narrow, and the session may closely resemble today, which would make trading difficult. The MSI forecasts higher prices with a potential run at the all-time highs, but the move is expected to be slow, choppy, and directional. The upside ceiling for tomorrow sits at $691. Dips toward $683 should continue to attract buyers. This creates a range environment where fading both highs and lows makes sense. There is no meaningful bear case unless price falls below $680. The bulls will look to defend the $685 to $683 zone overnight. A failure in that zone likely sends SPY to $680. If support holds, the bulls will attempt another push above $690, but a failure there would reopen a test of Friday’s lows and possibly lower. Gains above $690 may stall until $691 is cleared, as resistance above $690 remains significant. Crypto has moved sharply higher and is back on track to test $100K, which supports the current risk-on environment even though it is too early to know whether this move is a dead cat bounce or a true reversal. Most MAG stocks also rose, confirming continued leadership strength. The long-term bull trend remains intact above $640, and in the near term the bulls retain control as long as price holds above $685. Any test of $691 remains a strong short candidate on a failed breakout, but we continue to favor longs off support as dips are likely to be bought. As always, stay alert to macro risks and be prepared to trade what you see. Failed breakouts and failed breakdowns continue to offer the highest-probability setups, so remain flexible, avoid trading during Ranging Market States, and ensure all trades are fully aligned with MSI signals. Providing real-time insights into market control, momentum shifts, and actionable levels, the MSI when integrated with our Pre-Market and Post-Market Reports continues to sharpen execution precision and elevate trade quality. If you haven’t yet integrated MSI and our model levels into your process, now is the time. Contact your representative to get started as these tools are designed to support consistency and enhance performance.

Dealer Positioning Analysis

Summary of Current Dealer Positioning:
Dealers are selling SPY $687 to $708 and higher strike Calls while selling $686 Puts indicating the Dealers’ belief that prices will continue to rally on Tuesday and stay above $686. Dealers only sell ATM Puts when they are convinced prices will move higher. The ceiling for Tuesday appears to be $691. To the downside, Dealers are buying $685 to $565 and lower strike Puts in a 3:1 ratio to the Calls/Puts they’re selling/buying displaying little concern that prices could move significantly lower tomorrow. Dealer positioning is unchanged from neutral/slightly bearish to neutral/slightly bearish.
Looking Ahead to Friday:
Dealers are selling SPY $691 to $710 and higher strike Calls while also buying $688 to $690 Calls reflecting the Dealers’ desire to participate in any rally this week. The ceiling for the week appears to be $693. To the downside, Dealers are buying $687 to $565 and lower strike Puts in a 3:1 ratio to the Calls they’re selling/buying, reflecting a market that is not concerned about lower prices. For the week Dealer positioning has changed from bearish to neutral/slightly bearish. We advise reviewing Dealer positioning daily for directional clues. These positions evolve quickly and tracking them is essential for staying ahead of shifting market sentiment.

Recommendation for Traders
As we begin 2026, continue to respect the bullish structure while staying disciplined near resistance. Favor longs on pullbacks toward $687–$684 and consider shorts only on failed moves near $690–$692. With a heavy economic calendar ahead, remain flexible, manage risk tightly, and be prepared for volatility around Friday’s jobs report.

Good luck and good trading!