Market Insights: Friday, December 19th, 2025

Market Overview
US stocks closed out the week on a strong note Friday as easing inflation pressures and a renewed bid for AI-related names helped Wall Street extend Thursday’s rebound and recover from a volatile start to the week. The Nasdaq led the advance with a 1.31% gain, while the S&P 500 climbed 0.88% and the Dow added 0.38%, reflecting a broad but still tech-driven improvement in risk appetite. With Friday’s rally, both the S&P 500 and Nasdaq managed to finish the final full trading week of 2025 modestly higher, keeping hopes for a Santa Claus rally alive even as leadership remains uneven. Confidence in the AI trade improved meaningfully after a turbulent stretch earlier in the week, with Oracle and Nvidia helping anchor the rebound as investors reassessed concerns around funding, geopolitics, and demand. Oracle benefited from renewed optimism tied to AI infrastructure and strategic partnerships, while Nvidia gained sharply as reports suggested US officials are reviewing the possibility of allowing sales of its H200 chips into China, easing some fears around export restrictions. The broader macro backdrop also remained supportive, as markets absorbed a cooler inflation trend and signs of a gradually weakening labor market, reinforcing expectations that the Federal Reserve may continue easing policy in 2026. A plurality of traders still anticipate roughly two rate cuts next year, with some shifting toward more aggressive easing scenarios as growth shows signs of cooling without collapsing. Treasury yields ticked higher, with the 10-year rising toward 4.15% as global bond markets digested the Bank of Japan’s rate hike, but the move failed to derail equity momentum. Meanwhile, gold and silver hovered near record highs, and Bitcoin surged back above $87,900, signaling that risk appetite is selective but intact as markets head into the quieter holiday stretch.

SPY Performance
SPY delivered a strong follow-through session, opening at $676.57 and pushing steadily higher throughout the day to an intraday high of $681.09 before closing at $680.44, up 0.88% on the session. Trading volume reached 88.87 million shares, well above average, reflecting active participation tied to options expiration and late-week positioning. The ability to reclaim and hold above the $680 level into the close marked a notable improvement from earlier in the week, when rallies repeatedly failed near this zone. While $680–$681 remains heavy resistance, the close above $680 increases the odds of another attempt toward $685 next week, particularly if volume thins and selling pressure eases. Importantly, dips toward $675 were again bought overnight and during the session, reinforcing the role of the 50-day moving average as reliable near-term support.

Major Indices Performance
Friday’s gains were broad-based across the major indices, though leadership remained tilted toward technology. The Nasdaq jumped 1.31%, reflecting renewed confidence in megacap tech and AI-linked names after several sessions of de-risking. The S&P 500 gained 0.88%, tracking SPY’s move higher and recovering much of the week’s earlier losses. The Dow rose 0.38%, lagging slightly but still participating in the rebound, while the Russell 2000 added 0.76%, suggesting improving sentiment toward smaller-cap names after recent pressure tied to funding and growth concerns. The overall index mix points to stabilization rather than a full risk-on surge, with investors rotating selectively rather than chasing across the board.

Notable Stock Movements
It was one of the strongest sessions of the week for the Magnificent Seven, with most names finishing green and leadership clearly re-emerging in semiconductors. Nvidia led the group with a gain of up to 3.93%, reinforcing its role as the bellwether for AI sentiment and helping pull the broader tech complex higher. Most other megacap names followed suit, reflecting a renewed willingness to add exposure after earlier AI-related jitters. The main exceptions were Meta, which slipped 0.85%, and Tesla, which dipped 0.45% after recent strength. Outside of megacaps, AI and semiconductor-linked stocks broadly outperformed, signaling that concerns around AI funding and demand have cooled for now, though not disappeared entirely.

Commodity and Cryptocurrency Updates
Commodities and crypto reinforced the improving but still selective risk tone. Crude oil rose 1.05% to $56.59, remaining above the key $56 level that our model continues to flag as pivotal. While downside risk remains, holding above $56 keeps the door open for a move back toward $60 and potentially $70 if demand stabilizes and supply discipline holds. Gold edged higher by 0.11% to $4,369, staying near record territory and underscoring persistent demand for hedges even as equities rebound. Bitcoin surged 2.68% to close above $87,900, rebounding sharply and signaling renewed confidence in risk assets, though still within a broader consolidation range.

Treasury Yield Information
The 10-year Treasury yield rose 0.85% to close near 4.149%, continuing its recent bounce but remaining below the critical 4.5% threshold that tends to create more consistent headwinds for equities. In our framework, yields above 4.8% begin to pressure stocks more meaningfully, and a sustained move above 5% has historically coincided with sharper equity corrections. At 5.2%, our model suggests the probability of a 20% or greater drawdown rises substantially. Friday’s move higher in yields did little to disrupt equities, suggesting that markets are currently more focused on growth, earnings, and inflation trends than incremental rate fluctuations.

Previous Day’s Forecast Analysis
In Thursday’s newsletter, we projected SPY’s maximum range for Friday between $670 and $685 and emphasized that the market was likely to remain rangebound following the CPI-driven rebound. We noted that dips toward $675 were likely to be bought and that pushes into the $680–$685 zone would likely face resistance unless supported by improving breadth and volume. Our bias leaned slightly bullish as long as price held above $675, while still favoring tactical shorts near the upper end of the range.

Market Performance vs. Forecast
Friday’s action aligned closely with that framework. SPY held above $675 throughout the session, reclaimed $680, and closed near the upper end of the projected range without breaking above $685. The move confirmed that bulls have regained some initiative but have not yet wrestled full control from the bears. Resistance near $680–$681 capped upside progress, but the ability to close above $680 marks a constructive shift heading into next week.

Premarket Analysis Summary
In Friday’s premarket notes published at 7:43 AM, SPY was trading near $675.64 with a bias level at $678.10. We outlined targets above at $676, $678.10, $681, and $683.50, while noting that upward progress would likely remain fragile and capped unless price could hold above the bias. On the downside, we flagged $675.10 and $671.50 as key areas if selling accelerated. The plan emphasized skepticism toward sustained upside without a clean break above resistance and favored range-based tactics.

Validation of the Analysis
Intraday price action validated the premarket roadmap well. SPY pushed through the bias level, reclaimed $678, and spent most of the session consolidating just below $681. While the move stalled shy of $683.50, the ability to hold gains and avoid a reversal back below $678 reflected improving short-term structure. At the same time, the failure to push decisively beyond $681 reinforced our view that the market remains rangebound rather than trending.

Looking Ahead
Looking ahead to next week, the macro calendar is light, with no scheduled economic releases on Monday and only limited data later in the week. That lack of catalysts, combined with the holiday-shortened schedule, suggests lighter volume and potentially choppier trade. As a result, technical levels, dealer positioning, and any surprise geopolitical or policy headlines are likely to drive price action more than fundamentals in the near term.

Market Sentiment and Key Levels
Sentiment has improved modestly but remains balanced rather than outright bullish. SPY’s close at $680.44 places it back near major resistance, with full bull control only returning above $685. Resistance sits at $683, $688, and $690, while support rests at $677, $675, and $670. Holding above $675 keeps the recovery intact, while a failure there would shift focus back toward $672 and $670.

Expected Price Action
Our model projects SPY’s maximum range for Monday between $675 and $686, with the Call side dominating in a narrowing band that signals choppy action with brief trending periods. As long as SPY holds above $675, attempts to push toward $680 and $685 remain likely, though gains above $681 are expected to be capped initially. A break below $670 would open the door to $665, though building support may slow any downside move.

Trading Strategy
With volatility easing and volume likely to thin, we favor a disciplined range-trading approach. For longs, we prefer entries near $675 down to $670 on confirmed support, with upside targets at $681 and $685. For shorts, failed pushes near $681–$685 remain attractive, especially if momentum fades or volume dries up. With VIX dropping 11.50% to 14.93 and returning to risk-on territory, defined risk, moderate sizing, and respect for key levels remain critical.

Model’s Projected Range

SPY’s projected maximum range for Monday is $675 to $686, with the Call side dominating in a narrowing band that signals choppy action with brief trending periods. SPY rallied 0.59% to close at $680.44, right at major resistance, and volume was well above average due to OPEX, confirming participation. Overnight bears retested $675 and the dip was bought again. By the open, bulls took control and pushed price above $676, then held SPY near $680 for most of the session. The $680–$681 area remains heavy resistance, but the close above $680 increases the odds of another attempt toward $685 next week on lighter volume. We continue to expect rangebound trade between $675 and $685 until a catalyst shifts the market. Price slightly favors higher highs, but full bull control only returns above $685. Bears remain active, though they lack the edge, while broader bull control holds above $640. A weekend failure to hold $675 opens $672 and then $670. A push above $680 targets $685, and a break there opens $688 and potential new highs. With no major news Monday, traders should watch geopolitical headlines. The 50 DMA near $675 continues to support dips, and Santa Rally odds have improved but remain 50/50. Resistance sits at $683, $688, and $690, while support is at $677, $675, and $670. Gains above $681 are likely capped, while a break below $670 could send SPY toward $665, though building support may slow the move. Absent a catalyst, we prefer shorts near $681 and longs near $675 down to $670. Crypto rose strongly and most MAG stocks advanced, with the exception of Meta and Tesla, and leadership weakness has not aligned. VIX fell 11.50% to 14.93, returning to risk-on conditions that support equities. SPY closed in the lower third of its bull channel from the April lows, with structural support near $670.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI ended the session in a wide, Bullish Trending Market State with SPY closing at MSI resistance. There were no extended targets into the close yet extended targets printed above sporadically during the session and in the premarket. A strong rally out of the gate then led to sideways action for the rest of the day with SPY trading between $679 and $681. The MSI did not rescale overnight but after the open rescaled higher several times which confirmed the bull trend. But from 12:30 pm on, the MSI did not rescale but it did print extended targets from time to time. These stopped printing around 1:30 pm but started up again for 30 minutes after 2:30 pm but with price barely moved. For Monday the MSI forecasting higher prices but perhaps more of a range with a slow drift toward $685 rather than another big push higher. Support is at $678.89 with resistance at $680.84.
Key Levels and Market Movements:
On Thursday we stated, “The MSI forecasts higher prices for Friday, but we expect pushes toward $680 to be sold and dips toward $670 to be bought,” and noted, “If $675 holds, the bulls will try again to push above $681,” while also adding, “that level ($681) is likely to be sold.” With this context, and with the MSI opening in a narrow bullish state and SPY just below $677, we looked for a long but found little structure at the open. We waited for a clean setup, which appeared after the MSI rescaled higher and SPY tested MSI support at $678.50. We entered long around 10:30 and set T1 at MSI resistance at $679.92. After T1 hit, we set T2 at the premarket level of $681. The MSI continued to rescale higher, albeit slowly, and we held as the grind higher persisted. By 1 pm T2 was secured, and given our expectation that $681 would be sold, we prepared to exit and reverse. But with extended targets printing we waited for a period when they stopped printing to exit our trade and reverse short. That came on the third test of $681 around 2:40 pm so we exited and reversed short on what really was nothing more than a triple top. We set T1 at MSI support at $678.89. Price finally gave way a bit and SPY dipped back to $680 around 3:30 pm, we chose to scalp the trade, lock in gains for the week, and call it a day. Two for two, once again thanks 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:
Monday has no scheduled news, and with a shortened holiday week SPY is likely to shift into more rangebound behavior on lighter volume. Trading may thin as funds reposition into year end, leading to a slow grind higher rather than strong directional moves. The seasonal rally typically begins around the 24th, which keeps the door open for an attempt at new all-time highs. Monday and Tuesday are full sessions, with Wednesday a half day. The MSI forecasts higher prices for Monday, but any push toward $685 is likely to be slow and measured, while dips toward $675 should continue to attract buyers. This sets up a range environment where fading both highs and lows makes sense. There is no meaningful bear case unless price moves below $672, so the bulls will look to defend the $675 area over the weekend. A failure of $672 likely sends SPY to $670, and a break there brings $665 into play. If the $672–$675 zone holds, the bulls will attempt another push above $681, though gains above that level may stall until $683 is reclaimed. Above $683 resistance weakens and momentum toward $688 could accelerate. Crypto and most MAG stocks rose today, confirming continued strength in leadership, and both groups would need to weaken together to trigger a deeper pullback. The long-term bull trend remains intact above $640, and in the near term the edge stays with the bulls as long as price holds above $672. Any test of $688 remains a strong short candidate. As always, stay alert to macro risks and be prepared to trade what you see in the coming days. 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 $681 to $705 and higher strike Calls while buying $685 Calls AND selling $679 to $680 Puts indicating the Dealers’ belief that prices will continue to rally on Monday. Dealers do not sell ATM Puts unless they are convinced prices will move up. And by also buying $685 Calls, they are positioned to participate in any break toward the all-time highs. That said, the ceiling for Monday appears to be $683. To the downside, Dealers are buying $678 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 on Monday. Dealer positioning is unchanged from neutral/slightly bearish to neutral/slightly bearish.
Looking Ahead to Next Friday:
Dealers are selling SPY $681 to $710 and higher strike Calls while buying $683 to $684 Calls indicating the Dealers’ desire to participate in any rally above $683 next week. But by selling ATM Calls, Dealers are also noting they have low conviction that price will rally hard next week. The ceiling for the week appears to be $690. To the downside, Dealers are buying $680 to $565 and lower strike Puts in a 5:1 ratio to the Calls they’re selling/buying, reflecting a market that is showing some concern about lower prices. For the week Dealer positioning is unchanged from bearish to 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
Into Monday, continue to treat the $675–$685 zone as the primary decision area. Favor cautious longs near $675 on confirmed support and shorts on failed pushes into $681–$685. With no major news on deck and holiday conditions approaching, expect lighter volume, slower moves, and more mean-reversion behavior. Stay disciplined, remain flexible, and let price action at key levels guide your decisions.

Good luck and good trading!