2024: A Year of Unprecedented Trading and Investment Opportunities
As we step into the new year of 2025, investors around the globe are gearing up for what promises to be another eventful year in the financial markets. With the added volatility expected from the Trump Presidency, reminiscent of the market gyrations triggered by his infamous tweets during his first term, it’s essential to stay informed and prepared for what lies ahead.
The Missing Santa Rally: A Sign of Things to Come?
The absence of the traditional Santa rally this year, disrupted by a hawkish cut in December, has left many investors wondering about the future direction of the markets. This scenario bears resemblance to the events of 2018 when the Federal Reserve raised rates as anticipated but hinted at a more aggressive path of increases in the future. Additionally, the market was spooked by the Fed’s proposed reduction in its balance sheet.
However, as we entered the New Year, January saw a positive uptrend, leading to a steady rally in the markets. The burning question now is whether history will repeat itself this time around. One way to gauge this is by observing the ‘January effect,’ a phenomenon where stock prices tend to rise significantly in January, particularly small-cap stocks.
The Curious Case of Small-Cap Stocks and Market Distortions
Interestingly, small-cap stocks, which include those tracked by the iShares Russell 2000 ETF (IWM), have been lagging behind other major indices. This lag can be attributed to the fact that the price movement in the S&P 500 and Nasdaq is heavily influenced by a select group of stocks, creating distortions in their performance. This raises concerns about the sustainability of passive investing strategies in ETFs like the IWM.
Analyzing the IWM: What the Charts Are Saying
Taking a closer look at the monthly chart of the IWM, we can observe a failure to surpass the November 2021 all-time high, resulting in a two-bar reversal pattern. Chart indicators also point to a rising wedge and a potential second top, signaling downside targets if these patterns materialize. While these technical signals are valuable, it’s crucial to remember that chart patterns do not always play out as expected and should be analyzed alongside price action and volume signals.
On the daily chart, the price action for the IWM is currently above both the volume point of control and a strong resistance turned support level at $222.43. This indicates a potentially bullish outlook in the near term.
Looking Ahead: Opportunities and Challenges for Traders and Investors
As we navigate the complexities of the financial markets in the year ahead, both traders and investors are in for exciting times. With shifting dynamics, evolving trends, and unforeseen challenges, staying informed and adaptable will be key to capitalizing on opportunities and safeguarding investments.
In conclusion, 2025 holds immense potential for those willing to embrace change and uncertainty with a strategic mindset. By staying attuned to market developments, leveraging valuable insights from technical analysis, and remaining agile in decision-making, investors can position themselves for success in the ever-evolving landscape of finance.