Market Insights: Tuesday, December 23rd, 2025

Market Overview
US stocks continued their late-year grind higher on Tuesday, extending the rally to a fourth straight session as supportive seasonality and steady dip-buying kept risk appetite intact. The S&P 500 rose roughly 0.5% to notch another record close near the 6,910 level, while the Nasdaq gained about 0.6% and the Dow added close to 0.2%, reflecting a calm but constructive tone across markets. Investors largely brushed off a stronger-than-expected GDP report showing the US economy grew at a 4.3% annualized pace in the third quarter, well above consensus expectations. While the hot growth data slightly reduced near-term rate-cut expectations, markets continued to look past January and focus on easing later in 2026, with softer inflation trends and a gradually cooling labor market still supporting that outlook. Consumer confidence data from the Conference Board showed sentiment slipping for a fifth straight month, reinforcing the idea that households remain cautious even as equity markets push to new highs. Leadership once again came from megacap tech and AI-linked names, which benefited from both momentum chasing and fear of missing out as liquidity thins into the holidays. Commodities added to the inflation-hedge narrative, with gold, silver, and copper all extending powerful rallies toward fresh highs. With markets approaching the Christmas holiday and volume expected to remain light, investors appear comfortable letting prices drift higher as long as volatility stays contained and no negative surprises emerge.

SPY Performance
SPY continued its methodical climb, opening at $684.91 and pushing steadily higher throughout the session to an intraday high of $687.32 before closing near the highs at $686.78, up 0.48% on the day. Trading volume dropped to 49.62 million shares, well below average and consistent with pre-holiday conditions rather than waning conviction. Price action was controlled and orderly, with shallow pullbacks quickly bought and no meaningful downside momentum developing. The close above $685 marked a constructive development, as this level has repeatedly acted as resistance over the past two weeks. While follow-through will be needed to confirm a breakout, holding above $685 into the close tilts the near-term bias back in favor of the bulls.

Major Indices Performance
Gains across the major indices reinforced the broader risk-on tone. The Nasdaq led with a 0.63% advance, supported by renewed strength in large-cap technology and AI-related stocks. The S&P 500 gained 0.52%, setting another all-time high and continuing its steady December advance. The Dow rose 0.21%, lagging slightly but still participating in the upside, while the Russell 2000 added 0.37%, signaling modest but improving sentiment toward smaller-cap names. The overall index mix points to continued stability rather than speculative excess, with leadership remaining concentrated but not dangerously narrow.

Notable Stock Movements
The Magnificent Seven delivered another mostly positive session, helping anchor the broader market. Nvidia and Microsoft continued to attract inflows as investors leaned back into AI exposure, while Apple and Amazon posted moderate gains. Tesla traded higher early before fading slightly into the close, reflecting some profit-taking after its recent run. Meta and Alphabet finished modestly higher, though both lagged the broader tech complex. Outside of megacaps, strength in semiconductor and cloud-infrastructure names suggested that concerns around AI funding and capital intensity have eased, at least temporarily, as year-end positioning takes priority.

Commodity and Cryptocurrency Updates
Commodities remained a key part of the macro narrative. Crude oil rose 1.12% to $58.58, continuing its rebound and staying comfortably above the $56 level our model has flagged as critical. Sustained trade above this zone keeps the door open for a move toward $60 and potentially higher if demand holds. Gold climbed another 1.34% to $4,538, extending its historic rally as investors continue to seek protection against inflation uncertainty, geopolitical risk, and long-term currency debasement. Bitcoin added 0.92% to close near $89,200, maintaining its broader uptrend and signaling steady risk appetite within crypto markets.

Treasury Yield Information
The 10-year Treasury yield edged higher by 0.29% to close near 4.175%, reflecting the stronger GDP data but remaining well below levels that typically threaten equity valuations. In our framework, yields above 4.5% begin to create headwinds for stocks, while sustained moves above 5% have historically aligned with deeper equity corrections. At 5.2%, the probability of a 20% or greater drawdown rises meaningfully. Tuesday’s modest uptick did little to disrupt equities, reinforcing the view that markets remain comfortable as long as yields stay contained.

Previous Day’s Forecast Analysis
In Monday’s newsletter, we projected SPY’s maximum range for Tuesday between $681 and $688 and noted that a gradual push toward $685 and above was likely if holiday conditions kept selling pressure muted. We emphasized that volume would likely be light and that upside progress could be slow but persistent as long as $683 held as support.

Market Performance vs. Forecast
Tuesday’s action aligned cleanly with that framework. SPY remained within the projected range, reclaimed $685, and closed near the upper end of the band without any meaningful breakdown attempts. The steady, low-volatility advance confirmed that bulls remain in control under current conditions, even if conviction is driven more by seasonality and positioning than by fresh catalysts.

Premarket Analysis Summary
In Tuesday’s premarket notes published at 8:14 AM, SPY was trading near $684.12 with a bias level set at $684. We outlined upside targets at $685.50, $687, and $688.50 while flagging $683 as the key level bulls needed to defend. The plan favored patience and gradual upside rather than aggressive momentum trades.

Validation of the Analysis
The intraday tape validated the premarket plan well. SPY held above the $684 bias, pushed through $685, and consolidated near the highs without giving back gains. While price did not reach the uppermost targets, the structure remained constructive and consistent with a controlled holiday grind higher.

Looking Ahead
Looking ahead to Wednesday, the economic calendar is light, and markets will close early ahead of the Christmas holiday. With limited catalysts and reduced participation, price action is likely to be driven by technical levels, dealer positioning, and any unexpected headlines rather than macro data.

Market Sentiment and Key Levels
Sentiment remains constructive but measured. SPY’s close near $686.78 places it firmly above prior resistance at $685, shifting that area into first support. Resistance now sits at $688, $690, and $692, while support rests at $685, $683, and $680. Holding above $685 keeps the Santa Rally narrative intact, while a break back below would likely trigger consolidation rather than a sharp selloff.

Expected Price Action
Our model projects SPY’s maximum range for Wednesday between $684 and $692, with the Call side dominating in a tightening band that suggests continued upside bias with limited volatility. As long as SPY holds above $685, attempts to probe higher remain likely, though gains may be incremental rather than explosive.

Trading Strategy
With holiday conditions firmly in place, we favor a conservative, level-driven approach. For longs, entries near $685 to $683 on confirmed support remain attractive, with upside targets at $688 and $690. For shorts, failed pushes into $690–$692 offer tactical opportunities, though position sizing should remain small given the broader bullish context.

Model’s Projected Range

SPY’s projected maximum range for Wednesday is $685 to $690, with the Call side dominating in a narrowing band and very tight band that signals choppy action. SPY rallied 0.46% to close at $687.96, firmly above the $685 level that defines bull control. Volume was average, which confirms participation given volume is lower on a holiday week. Overnight the bears attempted to test the $683/$682 area that we identified yesterday as key support, and the bulls defended it again right at the open. Price spiked off $683 and never looked back. A small dip around 10 am was the only push from the bears and that didn’t do much but allow the bulls to step up and buy. The rest of the session unfolded as a slow grinding trend day, consistent with the early stages of a seasonal Santa rally. Once price cleared $685, $688 came into play, which was the level we flagged yesterday as a likely peak. With price holding firmly above $685, the bulls are in control and new highs are likely. Overnight the bulls should defend $684 at worst, and ideally hold above $687 to keep momentum intact. While unlikely, a failure of $684 would open the door to $680. Holding above $684 keeps the path open for a test of the all time highs near $690, where the first and possibly second attempts are likely to see resistance and a shallow pullback. The move from $687 to $690 is expected to be slow and choppy rather than explosive. With price above $685, SPY has broken out of the prior $675 to $685 range, and unless an external catalyst appears, the market is likely to grind higher into early January. The bears have little to no influence unless price falls below $680, while the broader bull market remains intact above $640. Traders should continue to monitor geopolitical headlines, particularly around Venezuela. Absent any external catalyst, resistance for Wednesday sits at $689, $690, and $691, while support sits at $687, $684, and $680. We favor shorts near $690 and longs near $687 down to $684. Crypto was slightly lower today while all MAG stocks except Tesla advanced. Sustained weakness across both groups would be required for any meaningful pullback to develop. VIX fell 0.57% to 14.00, supporting risk on conditions, with SPY closing in the lower third of its bull channel from the April lows and structural support near $671.

Market State Indicator (MSI) Forecast

Current Market State Overview:
The MSI ended the session in a wide, Bullish Trending Market State with SPY closing above MSI resistance turned support. There were extended targets into the close as well as for the entire afternoon session, and sporadically during the morning session. The MSI did not rescale overnight but after the open, a series of rescalings higher commenced and by noon, the MSI was settled into its current state with SPY at major resistance at $688. For Wednesday the MSI forecasts higher prices, potentially reaching new all-time highs. But it’s likely to be a slow slog as price attempts to make a new high. Support is at $687.22 and lower at $683.68.
Key Levels and Market Movements:
On Monday we stated, “price is likely to range with a slight upward drift,” and noted, “The MSI forecasts higher prices for Tuesday, but any push above $685 is likely to be slow and measured, with $688 acting as the near term ceiling,” while also adding, “Dips toward the $683 to $682 zone should continue to attract buyers.” With this context, and with the MSI opening in a wide bullish state at the $685 major resistance level, we waited for a long opportunity to see if SPY would make a run toward $688. Around 10 am SPY dipped to $684.50 after extended targets printed shortly after the open, which gave us a long entry at the 20 period EMA. We set T1 at MSI resistance at $686.25. This was not an easy entry because there was no clean failed breakdown, but we wanted to stay aligned with the bullish trend and our forecast for higher prices. T1 was secured by 11 am. We then waited for the MSI to rescale higher and set T2 at the next MSI level at $686.60. Extended targets began printing again, confirming we were positioned correctly. Once T2 was secured, we moved our stop to breakeven and trailed the remaining 10% position while targeting $688. The move higher was slow and methodical but never broke down. With extended targets continuing to print, we stayed patient. At 3 pm, with price reaching $688, we took final profits and called it a day. We don’t plan to trade tomorrow or Friday so we wrapped up the week, one and done, 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:
Wednesday is a half day with only Unemployment Claims due before the open. The projected range is extremely narrow and likely untradeable. Friday is a normal session, but we will not be trading due to expected low volume and rangebound conditions. We will resume trading on January 5th and encourage readers to use this time to reflect on 2025 and plan for 2026. The seasonal Santa Rally typically begins tomorrow, but it is already well underway and should continue into January. The MSI forecasts higher prices with a likely run at the all-time highs. The move is expected to be slow, choppy, and directional. The upside ceiling for tomorrow is $690. Dips toward $684 should attract buyers. This creates a range environment where fading highs and lows makes sense. There is no meaningful bear case unless price falls below $680. The bulls will look to defend the $687/$684 zone overnight. A failure there likely sends SPY to $680. If that zone holds, the bulls will attempt a push above $690. Gains above $688 may stall until $690 is cleared as resistance above $688 remains significant. Crypto was slightly lower while most MAG stocks rose, confirming continued leadership strength. Both groups would need to weaken together to trigger a deeper pullback. The long-term bull trend remains intact above $640. In the near term, the bulls maintain full control as long as price holds above $685. 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. 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 $688 to $705 and higher strike Calls while selling $686 to $687 Puts indicating the Dealers’ belief that prices will continue to rally on Wednesday. Dealers only sell ATM Puts when they are convinced prices will move up. The ceiling for Wednesday appears to be $690. 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 on Wednesday. Dealer positioning is unchanged from neutral/slightly bearish to neutral/slightly bearish.
Looking Ahead to Friday:
Dealers are selling SPY $689 to $710 and higher strike Calls while also selling $686 to $688 Puts indicating the Dealers’ belief that prices will continue to rally this week into Friday. The ceiling for the week appears to be $690. To the downside, Dealers are buying $685 to $565 and lower strike Puts in a 4:1 ratio to the Calls/Puts they’re selling/buying, reflecting a market that is less concerned 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 Wednesday, continue to respect the bullish structure while remaining mindful of thin liquidity. Favor longs on shallow pullbacks toward $685 and avoid chasing extended moves. Failed rallies near $690 remain reasonable fade candidates, but discipline and smaller sizing are essential. Let the market drift, manage risk, and avoid forcing trades in a holiday tape.

Good luck and good trading.