Market Milestones: The Grinch Who Stole Christmas

Carnage unfolded on Wednesday as the Fed announced fewer rate cuts for 2025 than the market had priced in, triggering a bloodbath across the board. Both the SPY and QQQ suffered their worst day since the August Yen Carry Crash, each shedding 3% in just two hours. While warning signs of froth were abundant, such a swift sell-off underscores the risks of an overextended market. Thursday’s lackluster candle isn’t giving the bulls much hope for a quick bounce like they have grown accustom to, suggesting that further downside is likely.

QQQ

This market has been feeling eerily reminiscent of 2021, with massive rallies in names like PLTR and TSLA, often seeing double-digit gains in a single session. Quantum computing stocks have surged triple digits this week, and big tech has continued to prop up broader indices.

The SPY was up bumping up against its large trendline resistance, a line that has held since this bull market began. It also hit the 1.764 extension of the August pullback before stalling out and rolling over. Interestingly, the SPY has lagged behind QQQ in recent weeks, marking a shift from the post-August rally, where SPY had led the charge. This divergence was echoed in the S&P Equal Wight (RSP) vs the Magnificent 7 ETF (MAGS). While RSP has now erased 115 days of price action and logged 14 consecutive bearish candles, MAGS made a new all-time high on Wednesday before pulling back and closing below just one week’s worth of gains.

RSP

MAGS

If you were counting on all-time highs for Christmas, you can forget about it because Jerome Powell is the Grinch who them. The most likely scenario from here is that SPY consolidates and further digests Wednesdays dramatic move before continuing a bit lower. Thursday’s gap up was an ideal opportunity to hedge positions, as outlined in our Thursday morning newsletter, but we could get another chance in the days and weeks ahead.

The 100-day SMA on SPY, currently at $573.64, is just 2% away and serves as the next key support level. If that doesn’t hold, $565.00 and $550.00 are next with the very last support before things start to get a bit more gnarly at $540.00. For bulls, holding above the 200-day SMA will be key to maintain the broader uptrend.

SPY 2 Day Chart

SPY 1 Day Chart

Bitcoin continues to flirt with major milestones. BTC came tantalizingly close to $100,000 on 11/22 before reversing for 12 days and retreating 9%. On Monday BTC came within a hair’s breadth of $110,000.00 before once again retreating and dropping 11%, so far. Optimistically, for those looking to stack more bitcoin, this could be the dip before the next leg higher. If we do not even get to $89,800, I will have become the boy who cried dip on Bitcoin. Whatever happens, I won’t be buying any more bitcoin until $88,888.88, as that levels offers decent risk reward if bitcoin can bounce to $120,000 in 2025. The 100-day SMA on BTC has risen to $78,100, which should be the low of any pullback that we see on BTC any time soon. However, the odds of it dropping even that low without a whole lot more equity weakness are relatively slim.

BTC

Ethereum (ETH) is retesting its triangle breakout level around $3,400, likely in its (b) wave of the final 5th wave in this years-long diagonal. This retest may be the last major pullback before ETH gears up for its final push higher—likely into new all-time highs.

If Bitcoin dips into the levels discussed above, ETH will follow suit and should drop at least to its 100-day and 200-day SMAs, which are sitting around $3,000 currently. The buy zone from $3,000 to $2,400 would offer an excellent risk-reward setup for positions targeting new cycle or all-time highs into 2025. If it breaks below $2,150, that would be cause for concern from a bullish perspective.

I’m not a huge fan of ETH from a fundamental perspective—its ever-evolving narrative, questionable leadership, and increasing competition are reasons to be skeptical. Still, the technical setup here is undeniably enticing. For those interested in gaining exposure, BlackRock’s iShares Ethereum Trust ETF (ETHA) is a simple way that everyone can access through their regular equity broker. ETHA options likely won’t be available until mid-next year (if they are approved), so stops will still need to be used to manage downside risk.

ETH