The Santa orgy continues. Ho, ho, ho's. The Santa rally runs from Christmas Eve through the first couple trading days of the new year. Two days of the Santy rally are under our belts, the belts that are now loosened a couple notches from all the food, cake, pies and candy. It is best to wear pants with an elastic waistline for Thanksgiving and Christmas feasts. Keystone also has pants with plastic-lined pockets so he can take a few drumsticks home. The SPX was up +0.3% on the Eve and flat on Friday so the Santa Claus rally is currently up +0.3% with 5 more trading days to play out. Marginal gains typically occur during this period of the year and that is what most traders and analysts expect.
The first full week of trading for 2026 begins on Monday, 1/5/26, and the US Monthly Jobs Report drops on Friday, 1/9/26. There are 3 trading days remaining in 2025. The 2026 trading year begins on Friday, 1/2/26.
The all-time record high for the SPX (S&P 500 Index; the US stock market) is 6945.77 that printed on Friday, 12/26/25 when Keystone was celebrating the start of Kwanzaa wearing a colorful headdress and banging on bongo drums. The party is well underway when the ladies arrive and begin dancing. Kwanzaa is a party every day through New Year's Day; work is overrated. Keystone also gave the servants their Christmas boxes and the day off for Boxing Day but told them not to be late for work tomorrow morning or they will be docked pay. Merry Christmas. The all-time closing high for the SPX is 6932.05 on 12/24/25, Christmas Eve.
The major topping action continues for the last 4 months at 6500-6900. It is an odd animal. The holiday euphoria, AI hype news, complacency and belief that nothing will go wrong, rate-cut salivating, and rich people continuing to spend money, maintain the stock market highs and create the all-time record highs that bookend Christmas.
Triple tops do not exist. That is an old saying in the stock market. It means that price will continue higher from the third peak, rewarding the bulls, and thereby nullifying the trip top. Is it true? The SPX prints a trip top now. There were three H&S patterns trying to form since October but the happy talk negates those fledgling head and shoulders patterns. Then it was a double-top or M-top with the two peaks you see, but price begins a rally into Christmas that starts to display the triple top.
The jolly price action at Christmastime shows why triple tops do not exist (price is punching higher). But will it continue? Price tags the upper standard deviation band and that may be the key reason price wanted to poke up a bit higher and deliver record highs into the Christmas stockings. Keystone received coal in his Christmas stocking hanging on the mantle. There was also a gum wrapper, cigarette butt, and a white hairy lint thing that may have been picked from Santa's beard, verifying Keystone's naughtiness and low opinion of his behavior in 2025.
The middle band at 6848, and rising, and the lower band at 6748, are on the table as potential downside targets going forward. We will know in only a day or two if the trip top holds, or not. Over the years, Keystone has found that about one-half the time the trip top holds and about one-half the time it does not. Price is extended above the moving average ribbon so a mean reversion lower is needed.
Remember the bounce in November off the 100-day MA and horizontal price support? The 100-day MA at 6671, moving higher, is important going forward. Ditto the support at the 20-day MA at 6848 (same as middle band) and the 50-day MA at 6790. Of course, the 6550 level is for all the marbles. Once that fails, it is over for the stock market.
The ADX shows that the last strong trend higher for the US stock market was July. That petered out in August and has trailed lower ever since despite record highs. As Billy wrote in Hamlet, "Something is rotten in the state of Denmark." There are lots of gaps (orange) that need filled down below.
The red lines clearly show negative divergence for all the chart indicators as price makes the higher highs. A neggie d spankdown is expected going forward. It is comical that each time the negativity kicks into gear, the AI hype and rate-cut happy talk saves the day, along with the Federal Reserve holding its jackboot on the throat of volatility to make sure stocks remain buoyant.
The weekly chart remains in negative divergence. It is ugly stuff and yet stocks float higher and higher in my beautiful bubble balloon. Up, Up and Away. Everyone is riding stocks higher in that big beautiful balloon. Wheee! Whoopie! We can fly!! Wheeee! La, la, la. Irving Fisher's ghost appears from 1929 announcing that the SPX 6900 level will serve as a permanent plateau and stocks will never drop below there again. Love is waiting in my big beautiful stock balloon, join us, come on now, one and all, invest your life savings in stocks as the investment houses sneak out the back door.
The PE is running at about 23 and with earnings at 300 that gives SPX 6900. The Wall Street hot-shot analysts and strategists are out with their 2026 predictions calling for the S&P 500 to end the year between 7100-8100. Of course it is all upside because the investment houses want your money and it is more attractive to be bullish to attract investors rather than being a Gloomy Gus. It is the way the crony capitalism filth game is played. The average prediction for next year by the hot-shot analysts and strategists is SPX 7650. That represents an expected +11% gain in stocks for 2026.
Since the PE is at nosebleed levels, the earnings will have to go up that means the rich will have to keep spending to keep the US turd afloat even after they blew their wad on Christmas and holiday gifts. Do you think that is logical? With the PE at 23, and a target at 7650, that means earnings will be 333 or an +11% gain in earnings in 2026.
If the PE drops back to a more normal 18 and say earnings hang in there, or leak a bit, say 290, that would place the SPX down at 5220. That sounds like a good number. Keystone's prediction for the end of 2026 is SPX 5220 or lower. Keystone's back is against all of Wall Street as usual, but a speculator lives for the fight. Sounds like a song by Son Volt. Back Against the Wall. Is darkness at your doorstep? Would you recognize it? How will you know?
There are no bears remaining on Wall Street. Everybody and his bro remain euphorically bullish and complacent refusing to believe that anything bad will happen. What, Me Worry? In the mother of all tells for the stock market, notable short-seller Carson Block at Muddy Waters Research has thrown in the towel proclaiming last week on business television that investors should not short the market and instead remain long stocks. That is called complete capitulation. The last remaining bear on Wall Street packs his suitcase and leaves town.
Keystone luckily saw Muddy Waters play a couple years before he passed. Joe Bonamassa did a great tribute with "Tiger in Your Tank" from Red Rock. They are blues masters. Okay honey, come on over here, it is time to check your oil, and clean your carb.
The holidays are fun and enlightening. Folks are happy they are making their +10% to +15% in stocks this year but when asked how they felt in the spring when they lost -20% to -30% of their money, the deer in the headlight looks were priceless. What drop? Who? When? Did that happen? Many people do not even realize that the big drop occurred in the stock market this year. The ones that did, quickly said they did not care because it (the stock market) will automatically come back (that it did and then some).
Americans are trained to think that way but we are becoming a nation of old folks. When the population was running higher rapidly and productivity gaining, the sky was the limit for stocks. Going forward, the older folks with all the wealth in the stock market will exit stage right to pay their increasing health bills and to support their kids that cannot support themselves in this new America. The young barista with massive college debt is not socking away a thousand or more bucks per month into the stock market. Today's vibe is a lot like the 1970's the last time the split between rich and poor was at a super wide level. The US is the land of the have's and have-not's. That is not going to go on forever, kiddo's.
You can keep watching the Santa rally and see how it stacks up through Monday, 1/5/26. You can watch the trip top to see if it is a triple top, or not. You can watch to see if the neggie d spankdown kicks into gear. There will be lots of excitement ahead. The charts are sick but the happy talk is enough to keep putting off the inevitable.
The January barometers will be watched where the first week in January usually tells you how the month plays out and the month of January typically tells you how the year will play out. These metrics are not of much use but people will watch and comment on them.
It is time for the end of year montages showing all the key events of 2025. Of course, there will be the funeral montage, with touching sentimental piano music in the background, displaying all the people that croaked this year. The Cure just lost band member Perry Bamonte at 65 years young. All you can do when old, is sit and look at the photographs, and remember the memories. Pictures of You. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
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