Things You Need to Know
- Quadruple Witching was NOISE, not a signal.
- Tech takes the lead again and that theme is NOT fading.
- GDP due out tomorrow – nothing else matters.
- Year-end dynamics matter more than eco data right now.
- Try the Maltagliati Pasta with Canneloni Beans.
So the headlines tell you that stock volumes spiked ‘Amid Record Quadruple Witching’ – as if that is supposed to be a ‘thing’ – it wasn’t – we discussed it – The volume – which was due to the quarterly expiration of 4 sets of options – means absolutely nothing to core investment idea, nothing. Some threatened that the volume would create and amplify volatility or that a spike in volume supports the investment thesis – yeah, No – that’s not what happens either.
Yes – 26 billion shares traded and yes that is 50% more than the 12-month average – but it means nothing to anyone building a long-term portfolio. Why? Because…….
Every contract has two sides — and both sides know it. For every option that expires or gets rolled, there is: a buyer AND a seller. Neither side is surprised. Both sides expect the contra party — because that’s literally how the trade exists.
Most positions are already hedged. Large players (dealers, institutions, market makers) – hedge continuously, delta-adjust daily, often neutralize risk well before expiration – By the time expiry hits, the real risk has already been managed.
Rolling is mechanical, not emotional. When positions are rolled – old contracts are closed, new ones are opened simultaneously, exposure stays largely the same, this is risk TRANSFER, not risk CREATION. Think of it like refinancing your mortgage – new loan, but old house.
In the end – in this case volume does NOT equal conviction. High volume is NOT new information, high volume is NOT directional belief, high volume IS offsetting flows.
If expiry caused chaos, it would happen every time and it doesn’t. Quarterly expirations (like monthly expirations) are scheduled, known years in advance, modeled to death. The markets don’t get blindsided by these calendar events.
So, what happened? Stocks did rise as we closed out the last full trading week of the year – with many still hoping for that late month push – known as the Santa Clause rally. The Dow advanced by 183 pts or 0.4%, the S&P up 60 or 0.9%, the Nasdaq gained 300 pts or 1.3%, the Russell added 21 pts or 0.9%, the Transports added 41 or 0.25%, the Equal Weight S&P gained 29 pts or 0.4% while the Mag 7 added 232 pts or 0.7%.
Tech – was the shining star once again…..the sector and anything connected to it rose. The XLK + 2.2%, Cyber + 1%, Semi’s + 2.6%, Disruptive Tech + 2%, Quantum + 2% – individual names in that space up even more – IONQ + 4.4%, QUBT + 5.3%, QBTS + 7.7%, RGTI + 4.1%, Automation & Robotics + 1.7%, Software + 1.5% & Next Gen Internet (ARKW) + 2.3%. And what this tells you is that anything TECH is in vogue…and that the theme will continue to be the theme into the new year.
Of the other 10 major S&P sectors – 5 rose while 5 ended lower. Supporting the UP move, in addition to Tech, the Industrials + 0.9%, Financials +0.6%, Communications + 0.04%, Healthcare + 0.7% and Basic Materials + 0.45%.
The losers – Utilities – 1.3%, Consumer Discretionary -0.4%, Consumer Staples -0.5%, Real Estate – 0.4% while Energy ended the day flat.
What we didn’t hear anyone talking about was the economic data that came out: weaker Existing Home Sales and a softer University of Michigan Sentiment survey. Why? Because it doesn’t matter right now.
The market’s focus is on the final trading days of the year — asset managers protecting gains and window-dressing portfolios for the end-of-quarter and end-of-year marking period.
Just FYI — history tells us the S&P 500 advances by about 1.3% on average during the final two weeks of the year. If that holds, the implied year-end target becomes 6,922 (6,834 × 1.013) — right at the 2025 high.
Now remember what I’ve been saying: If we kiss and pierce that level, expect the algos to shift into overdrive and push us toward 7,000 — not because of fundamentals, but because it’s a big, round number, and just think about what that does to investor psychology heading into the new year. Just sayin’.
Bonds fell – the TLT and TLH both lost 0.7% and that pushed yields higher. The 10-year Treasury ended the day yielding 4.16% while the 30-year is yielding 4.84%. And btw – that latest FED cut did nothing for 30 yr mortgages – they are still hovering around 6.2%.
Oil rose 1% on Friday and is up another 1.6% this morning, trading at $57.40 — still very much churning. The move is tied to building tensions between the U.S. and Venezuela, yet price remains squarely within the trading range we’ve been discussing: $55 to $58.60. Trendline resistance sits at $58.60, and until that level is decisively cleared, this remains a range-bound trade, not a breakout.
Gold ended Friday at $4,385 and is up $55 this morning, trading around $4,440. The move is being attributed to rising geopolitical tensions and the ongoing rate-cut narrative — even though rate cuts are not happening anytime soon (but that’s another story).
Gold is now teasing the October high, and a clean breakout from here would once again put gold in uncharted territory. A trendline drawn from the April high ($3,611) through the October high ($4,450) suggests the potential for gold to trade toward $4,700-ish over the coming months. Meanwhile, trendline support sits near $4,180. If the Venezuela drama continues – then expect gold to advance, if we get a regime change (think friendlier) then gold will back off, if not – Hold onto your hats!
Eco data this week will be all about tomorrow’s GDP — assuming anyone is actually paying attention. Consensus expectations are for +3.2% with the whisper number more like 3.6%.
Looking ahead, GDP is expected to reaccelerate meaningfully in the new year, with a growing chorus now talking about 5% growth rates. The last time the U.S. achieved that kind of growth ‘organically’ was during the Ronald Reagan Presidency.
Before you go and scream at me – Yes, GDP surged 5.7% in 2021, but that came off the back of the massive COVID-related contraction in 2020, when the global economy was effectively shut down. That was a rebound, not organic growth — and the two are not comparable.
The bottom line is that sustained, organic 5% GDP driven by productivity, investment, and expansion — not recovery, voo doo math — would be historically significant and would fundamentally reshape the macro-economic narrative going forward.
And don’t expect the rate cutters to be happy. Why? Because – even if we grow by 4% – then there is no economic justification for continued rate cuts, the economy would NOT be in distress. Cutting rates on the back of this GDP print wouldn’t be “normalization” — it would be unnecessary and risk reigniting the very inflation pressures the Fed has spent years trying to contain.
Here is where context matters – 5% GDP is overheating if it is driven by demand, not capacity: Consumers spending faster than productivity can support, Fiscal stimulus + easy financial conditions at the same time, Tight labor markets leads to wage pressure leads to sticky inflation.
5% GDP is not overheating if growth is supply-side driven: think Productivity gains (AI, automation, capex boom), Labor-force expansion, Energy independence. Efficiency gains that expand capacity. That’s non-inflationary growth. So, which will it be?
This morning futures are higher – Dow futures are +25, S&P +26, Nasdaq +150, while the Russell is + 8.
Remember – this week and next are holiday shortened weeks, players will be away, volumes will decline and moves will become MORE amplified – in either direction. This is not the time to make emotional investment decisions…. stick to the plan – Capisce?
European markets are churning a bit lower…. the UK and France both down about 0.4%…. the rest of them are churning around the unchanged line. Look – it’s no worries – European markets have put in a tremendous year…. Spain is the winner up 47% with Italy in second place at +30%. Germany and the UK up 20%, the Euro Stoxx up 17% while France is in last place at +10%.
The S&P closed at 6,834 up 60 pts on the day. As I noted above – if Santa comes – then we can expect a 1.3% rally in the S&P from here, if not – what are you worried about? The market has had another memorable year.
Call me at 561-931-0190 – to give you a no obligation portfolio review. Let me help you assess the risk of the portfolio vs. the risk you are willing to take.
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
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Fresh Maltagliati Pasta and Cannelloni Beans (Maltagliati – pronounced: Ma – tal – ya- ti)
Fresh Maltagliati pasta is a pasta which is made from scraps and left over after other pastas have been made. The random shapes of maltagliati pasta have become so popular in some parts of Italy that some companies actually deliberately manufacture this pasta. Maltagliati literally means “badly cut” and refers to the odd shapes – and although originated in Emilia Romana – you can be sure that Italians have been using their freshly made pasta scraps for many years- because – Why would you throw out perfectly good pasta? In the event you cannot get it – you can just as easily break up lasagna to make the “Maltagliati”.
For this you will need: Maltagliati Pasta, Cannelloni beans, water, olive oil, garlic, onions and s&p.
Begin by sauteing some crushed garlic in olive oil on med heat – careful not to burn the garlic – now add I diced onion – sauté some more – maybe 10 mins.
Next – 2 cans of Cannelloni beans – do not strain. Add three cans of water – season with s&p – bring to a boil and then turn heat to simmer. Stir occasionally. After 20 mins…. remove 2 ladles of beans and set aside…. now in a food processor – blend the remaining beans to form a thick soup – return to the pot and add back the beans. Now – take your fresh pasta and add directly to the soup and cook*. Fresh pasta will cook in like 3 mins….so be careful……Serve immediately in warmed bowls with plenty of fresh grated Parmigiana cheese.
Buon Appetito.