Monday Takeaways: The First Test of 2025

Shah Gilani|January 6, 2025

The holidays are behind us… and folks are back at their desks, ready to trade.

Despite missing the Santa Claus rally, tech stocks are finding their footing again after a brief sell-off.

But two key factors could impact this rally…

That’s why we need to keep a close eye on the S&P support levels I see.

And this is all ahead of a critical fourth-quarter earnings season kicking off next week…

Tune in for your Monday Takeaways. Don’t miss what’s moving your money… NOW.

Click on the thumbnail below to watch.

Transcript

Everybody. Shah Gilani here with your Monday Takeaways.

A lot of the country is pretty cold. Hope you’re not among them. I’m in Florida, but I’m wearing this to represent the cold Midwest. A lot of folks called me this morning saying they’re freezing, telling me how lucky I am to be in Florida.

Hope you’re safe and had a great New Year. Here we are in 2025. It’s time to get back in the chair, turn on all the charts, watch everything, figure out where we’re going, and start to set up. Let’s review the takeaways. We had two slow weeks because of Christmas and New Year’s both falling on Wednesdays.

Now the microphones are up, headsets are on, screens are lit, and we’re off to the races.

Today, the Nasdaq composite is up 1.41%, and the S&P is up 0.85%. Based on what happened at the end of last week and year-end, we didn’t have a Santa Claus rally after Christmas. We fell instead. The Nasdaq 100 dropped almost 6% in just a few days, which scared people as the mega-cap names sold off. Now they look cheap.

Today, everyone’s back at their desks analyzing numbers. Let’s see how cheap they get, or if this sell-off – or really, profit-taking – is over. I’ll pull up some charts in a second to go through numbers. But what else do we need to take away from last week?

Oil is back in the picture. WTI (West Texas Intermediate) rose 5% last week. Another concern with oil and distillates is natural gas. Natural gas, which heats most of Europe but not so much the United States, is a big deal. European supplies are at 70% capacity now, significantly lower than last year’s 83.5%. Natural gas prices have already risen, and if WTI reaches $80-plus, equity markets might slow.

The markets rallied earlier on news that Donald Trump wouldn’t implement his harsh tariff regime from his campaign. Emerging markets and their currencies rallied while the dollar fell. However, Trump just posted on Truth Social that there was absolutely no merit to that story. Markets came down a bit but are still holding early morning gains.

The takeaway from last week’s sell-off is that it gets scary when the expected rally doesn’t materialize, but we’re still in decent shape.

Let’s look at the S&P because many of you follow it. I got many emails and calls from friends asking if we’re going to break down here. My answer is simply that there’s no reason to break down. Could we? Of course, but we’re not there yet.

Regarding S&P 500 support: First important support is 5,830. Lower than that is 5,700. These are big drops, but that’s what people are worried about. Further supports are 5,400 and 5,150 – that would be scary, about 15% down, knocking on correction territory, heading toward 20%, but we’re not there. The chart looks pretty strong.

The big news comes next week with earnings. Markets will probably bounce from last week’s action, and we’ll see how they hold up this week. Things will start to percolate and maybe explode one way or another next week with fourth-quarter earnings. This week brings economic data on labor markets and consumer health. These will likely move markets, but bond movement is key.

Currently, the 10-year yield is around 4.56%. The expectation is it will return to 5%. This morning, analysts are talking about 5.25%, 5.50%, and one bank analyst still predicts 6% in 2025.

Current markets: S&P up 0.95%, Nasdaq up nearly 1.5%. Leadership names: Nvidia up 3.5%, Apple up over 0.5%, Amazon up over 0.5%, Microsoft up almost 1.5%. Bitcoin near $99,000. VIX just over 16.

As volatility decreases, risk parity funds might put more capital into equities. I’m not overly worried about a sell-off unless the bond market tanks. The upcoming earnings period will be interesting. If fourth-quarter numbers are good, this rally could extend. If executives express concerns about sticky inflation, elevated producer prices, or high financing costs, we might see more profit-taking, but we’re not there yet.

Happy New Year. Go make some money. Cheers.