Strategy Winter — Spring 2025. S&P500 Index Choking Diagonal
US markets were shacked on Friday, January 10th, after the December NFP jobs report came in much stronger than expected.
The US economy added 256,000 jobs in December, well above the average economist estimate of 155,000. The unemployment rate unexpectedly fell to 4.1% from 4.2% in November, although it remains above its 6-month simple moving average.
The Nasdaq-100 immediately fell about 1%, while the yield on the 10-year US Treasury note jumped nearly 10 basis points to 4.785%, its highest since October 2023.
The strong payrolls report further strengthened the case for the Federal Reserve not to cut interest rates again until at least 2025.
The move in stocks and bonds is a continuation of what has been happening in recent weeks: After a period of mega-euphoric optimism, investors have begun to expect higher inflation driven by President-elect Donald Trump’s proposed trade and fiscal policies. If bond yields continue to rise, Americans will feel the brunt of it.
The CME FedWatch Tool shows that markets now expect just one rate cut of 25 basis points this year, down from as many as three at the end of last year. The odds of no rate cuts in 2025 more than doubled to 28% on Friday morning.
The dollar index
DXY skyrocketed to the Moon, while the yield on 10-year U.S. sovereign bonds 
TNX stays well above 4.5%.
Endogenously, the market has been preparing for such turbulence for a long time, as discussed in the previously published idea “Strategy 2025. BTC Airless Scenario Below $100'000 Choking Point”.
I have to remind that the financial market had tough weeks in December 2024, but it could also face a tough year in 2025, as I noted then.
The market was on track for its worst weeks in years after the Federal Reserve gave a hawkish forecast for interest rate cuts in 2025. But looking at the market internals, it was clear that the damage had been done well before the December Fed meeting – and this signal was a historical indicator of tough times ahead.
Thus, Dow Jones Futures
YM1! ended 2024 with the 3rd RED WEEK in a row, forming the Bearish Candlestick Pattern "Three Black Crows" on the weekly timeframe, which developed, remarkably, from the all-time highs of the Dow Jones index.
Last week, Dow Jones Futures ended with the 6th RED WEEK in a row - and this is a rather rare event.
Historical backtest analysis over the past 25 years shows that this can lead to a further (at least) 10-percent drop for the Top-30 stock club.
Bulls have done a lot of work, advanced more than 2,000 points in 2023-24, for the S&P500 index. However they were unable to finalize their achievements confidently above the round 6-thousand mark by the end of 2024.
By the way, the same inability in Bitcoin to finalize 2024 above the round 100,000 mark is now repeatedly throwing the market back to lower price marks, as discussed in the recently published idea.
The main technical chart indicates a suffocating bearish diagonal in development for the S&P500 index, with targets for decline down to 5'250 points.
The US economy added 256,000 jobs in December, well above the average economist estimate of 155,000. The unemployment rate unexpectedly fell to 4.1% from 4.2% in November, although it remains above its 6-month simple moving average.
The Nasdaq-100 immediately fell about 1%, while the yield on the 10-year US Treasury note jumped nearly 10 basis points to 4.785%, its highest since October 2023.
The strong payrolls report further strengthened the case for the Federal Reserve not to cut interest rates again until at least 2025.
The move in stocks and bonds is a continuation of what has been happening in recent weeks: After a period of mega-euphoric optimism, investors have begun to expect higher inflation driven by President-elect Donald Trump’s proposed trade and fiscal policies. If bond yields continue to rise, Americans will feel the brunt of it.
The CME FedWatch Tool shows that markets now expect just one rate cut of 25 basis points this year, down from as many as three at the end of last year. The odds of no rate cuts in 2025 more than doubled to 28% on Friday morning.
The dollar index
DXY skyrocketed to the Moon, while the yield on 10-year U.S. sovereign bonds TNX stays well above 4.5%.Endogenously, the market has been preparing for such turbulence for a long time, as discussed in the previously published idea “Strategy 2025. BTC Airless Scenario Below $100'000 Choking Point”.
I have to remind that the financial market had tough weeks in December 2024, but it could also face a tough year in 2025, as I noted then.
The market was on track for its worst weeks in years after the Federal Reserve gave a hawkish forecast for interest rate cuts in 2025. But looking at the market internals, it was clear that the damage had been done well before the December Fed meeting – and this signal was a historical indicator of tough times ahead.
Thus, Dow Jones Futures
YM1! ended 2024 with the 3rd RED WEEK in a row, forming the Bearish Candlestick Pattern "Three Black Crows" on the weekly timeframe, which developed, remarkably, from the all-time highs of the Dow Jones index.Last week, Dow Jones Futures ended with the 6th RED WEEK in a row - and this is a rather rare event.
Historical backtest analysis over the past 25 years shows that this can lead to a further (at least) 10-percent drop for the Top-30 stock club.
Bulls have done a lot of work, advanced more than 2,000 points in 2023-24, for the S&P500 index. However they were unable to finalize their achievements confidently above the round 6-thousand mark by the end of 2024.
By the way, the same inability in Bitcoin to finalize 2024 above the round 100,000 mark is now repeatedly throwing the market back to lower price marks, as discussed in the recently published idea.
The main technical chart indicates a suffocating bearish diagonal in development for the S&P500 index, with targets for decline down to 5'250 points.
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