Prior Trading Day Summary
On Wed Dec 31 2025 trading volume was still below average as holiday trading continued with many investors away on holidays. Friday’s volumes should also be low.
The S&P closed down 50 points to 6845 on 3.3 billion shares traded. 72% of stocks closed lower. For the week the index is down 84 points.
The NASDAQ fell 177 points closing at 23241. Volume was 6.0 billion shares traded. 65% of stocks on the index were declining. For the week the NASDAQ is down 351 points.
While there are plenty of signs that we may not see the anticipated Santa Claus Rally this year, there are still two days left for the rally (Friday and Monday) and it is possible the indexes could rally strong enough to keep the anticipated rally intact. However if Friday closes lower it will make it more likely there will not be a rally this year.
Let’s review the closing technical indicators from Wed Dec 31 20925 to see what to expect Fri Jan 2 2026.
Stock Market Outlook: SPX Closing Chart For Wed Dec 31 2025
The index closed below the Upper Bollinger Band and below the 21 day moving average. This is bearish.
The closing candlestick is bearish but also signals a possible bounce as the candlestick fell sharply and below the 21 day on Wednesday..
The 21 day moving average is rising and closed at 6855. This is bullish but the rise in the 21 day is slowing considerably.
The 50 day moving average is rising and closed at 6802. This is bullish but the rise in the 50 day is also slowing considerably.
The 100 day moving average is rising and closed at 6657 which is bullish.
The 200 day moving average is rising and closed at 6412 which is bullish.
The Lower Bollinger Band is trending sideways and still above the 100 day moving average. This is neutral. The Upper Bollinger Band is falling which is bearish. A Bollinger Bands Squeeze is underway. The initial outlook appeared higher for stocks out of the squeeze but Wednesday’s close now looks like stocks could fall lower out of the squeeze. Caution is advised until the signal is clearer.
The SPX chart is more bearish for Fri Jan 2 2026. Bearish signals continued to grow on Wednesday.
SPX Stock Market Outlook review of Wed Dec 31 2025
Stock Market Outlook: Technical Indicators Review
Momentum: Momentum is falling but positive. This is bullish.
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MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued an up signal on Tue Dec 23 2025. The up signal was weaker on Friday and ready to issue a down signal today.
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Ultimate Oscillator: The Ultimate Oscillator is falling sharply.
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Slow Stochastic: The Slow Stochastic has a down signal in place.
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Relative Strength Index: The RSI signal is falling sharply.
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| Rate of Change: The rate of change is falling and signaling a possible lower close on Friday. It is at levels where often stocks attempt a bounce. Settings: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. With the Rate Of Change, prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises, the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline. |
Stock Market Outlook: Support and Resistance Levels |
| 6950 is resistance |
| 6925 is resistance |
| 6900 is resistance |
| 6875 is resistance |
| 6850 is resistance |
| 6800 is resistance |
| 6775 is resistance |
| 6750 is resistance |
| 6715 is resistance |
| 6700 is resistance |
| 6675 is support |
| 6650 is support |
| 6625 is support |
| 6600 is support |
| 6590 is support |
| 6570 is support |
| 6550 is support |
| 6500 is support |
Stock Market Outlook for Fri Jan 2 2026
January is an excellent barometer for market direction for the year. Historically over the past 75 years if January ends lower the index has entered a bear market or had at least a 10% correction or a flat market. When 2025 started the majority of predictions were for a single digit return by year-end. That proved too conservative. Once again to start 2026 the majority of analysts are predicting a single digit return. There are no predictions of a bear market for 2026. Part of the outlook is based on so many analysts being wrong for 2025. The large gains in 2025 changed the minds of many analysts for 2026.
For Friday Jan 2 the technical indicators are pointing lower but some of the declines have been dramatic which often signals a bounce is possible or coming, perhaps next week. The Rate Of Change indicator is already at a level where a bounce is likely. Both indexes are down on the week. There are just two trading days left for the anticipated Santa Claus Rally to happen. The outlook however has become poor for any rally. Nonetheless while the outlook is lower for the SPX, a strong rally today and again on Monday could keep alive the Santa Claus Rally. If however the outlook for Friday is correct and the indexes close lower, it is highly likely there will not be a Santa Claus Rally this year. Historically when there is no rally, there is a higher chance for a bear market or larger correction. However let’s not forget that in early April 2025, President Trump’s tariffs announcement sent the index down 20% and into bear market territory. The NASDAQ and Russell 2000 fell deeper than the SPX. Therefore even a correction in 2026 does not necessarily mean a losing year for stocks. It really is too early yet to make predictions with any degree of certainty.
On Another note, on Wednesday the Weekly Initial Unemployment Insurance Claims fell to 199,000 down 16,000 from the week early indicating a pick up in hiring could be underway and beating all estimates. We will know more next week when we get the December non-farm payroll numbers on Fri Jan 9.
For Friday the outlook is for a bounce but a high probability of a down signal from the MACD technical indicator and slim chance of the Santa Claus Rally.
Potential Economic and Political Market Moving Events
Monday:
10:00 Pending Home Sales rose more than estimated to 3.3%
Tuesday:
9:00 S&P Case-Shiller home price index was better than estimated, coming in at 1.3% but still lower than 1.4% prior.
2:00 Minutes of Fed’s December FOMC meeting
Wednesday:
8:30 Weekly Initial Unemployment Insurance Claims were well below estimates at 199,000 falling from last week’s 215,000.
Thursday:
New Year’s Day holiday
Friday:
9:45 S&P final manufacturing is estimated to slip slightly to 51.7 from 51.8