Before last week, the SPY was having its worse week since November 2008 on AI bubble fears, diminished outlook for an interest rate cut at the Fed’s next meeting, mixed earnings, uncontrolled deficits, wars, inflation, a slowing job market, immigration crackdown, etc.
The seasonally bullish Thanksgiving holiday, however, brought cheers to the bulls – in a huge way!
Not only the broader markets drift higher, but they powered higher, slicing through the bearish Wide Range Bar (-WRB) from 11/20, allowing the Index ETFs to move higher into the void and close with huge weekly gains.
Breadth expanded greatly, temporarily reversing the media’s fears about valuation concerns in the tech space, particularly around the “AI” trade.
Although there are still many beaten down weak stocks, the Index ETFs are near record highs on optimism over a Fed interest-rate cut in December.
Fed funds futures traders now pricing in an 85% probability of a cut following dovish Fed comments from NY Fed president Williams, Daly and Waller during the week.
A powerful expansion in internal breadth reinforced last week’s surge, the kind of thrust that historically supports a bias to buy the next controlled dip rather than expect a quick failure.
Sentiment also reset: the extreme put-buying that helped mark the November 20th low has eased back to neutral, putting the market in a healthier emotional state—not fearful, not euphoric.
The volatility index collapsed, returning to the same low zone that preceded the October high. But this time is different. The October peak occurred without broad market participation, while last week’s advance occurred with it.
Because of that discrepancy, a low VIX should not be interpreted as an automatic warning sign. It simply tells us that last week’s panic has been fully unwound.
Too Far - Too Fast - What's the Plan?
That said, the rally was “too far, too fast.”
A period of digestion—whether sideways or modestly lower—would be normal and constructive. What we are not expecting is a decline of similar magnitude to the October–November slide.
Interest rates remain central to the next move. Yields fell sharply last week, helping fuel the equity advance, but they are now back near the support zone from which they launched higher in October.
This makes the next few days a major inflection point, especially now that economic data is resuming after the government shutdown.
Data confirming a December rate cut → supports continued equity strength
Data casting doubt → raises the odds of a pullback
Another key factor is options positioning.
Open interest in S&P 500 options expiring this month is heavily skewed toward the 7000 strike, indicating that large traders are positioned for the possibility—if not the probability—of a push toward that level.
It doesn’t guarantee the move, but it provides a roadmap of where the market could gravitate if the bullish momentum and breadth continue.
Still, even with that upside magnet, we cannot rule out a retracement.
The most logical technical levels remain:
The 50-day moving average
The 6750 area, which aligns with intra-day support and an unfilled gap just above it
A dip into either of these areas would be completely normal within the context of last week’s breadth thrust and would likely attract buyers.
Finally, one of the most compelling themes going into December is the opportunity in beaten-down stocks and lagging sectors.
Money rotated aggressively into these groups last week, and many of them now have the structure to produce continuation patterns or pullback setups. These will be part of our focus list, along with ETFs showing the strongest rotation and sponsorship.
The evidence continues to favor higher prices into year-end, with pullbacks offering opportunity—provided interest rates behave and economic data remains supportive of a December cut.
Check Here or MT End of Year Specials!
