Market Whiplash – December's Final Act

Happy New Year, trader! 🎉

As we step into 2025, the markets have wasted no time delivering excitement — and challenges.

From a post-holiday rally to a significant year-end drop, it’s been a whirlwind week.

In today’s issue, we’ll unpack the reasons behind the SPY’s decline, dive into the art of drawing trendlines, explore trend following as a strategy, and set fresh goals to kickstart the year.

Let’s go!

Are you ready for today’s question?

What is the term for the strategy of riding the market's prevailing trend until it shows signs of losing momentum?

• A) Mean Reversion

• B) Swing Trading

• C) Scalping

• D) Trend Following

We’ll reveal the answer in our next issue — stay tuned!

Market Insight: What Caused the Late-December Market Drop?

December’s market ride had a dramatic end!

After a rally peaking on December 26, the SPY took a sharp turn south between December 27 and 31.

What drove the sell-off?

While the exact reasons aren’t definitive, one likely factor stands out: Policy Uncertainty.

Although no firm policies have been announced, the market dislikes ambiguity — and it’s reacting accordingly.

Additionally, the downturn may have been fueled by a combination of profit-taking after a stellar year, portfolio rebalancing typical of year-end, and amplified price moves due to thin holiday trading volumes.

While we can’t pinpoint a single cause, these dynamics give us a snapshot of what might have shaken the market.

As traders, it’s a reminder to stay adaptable and prepared for volatility — expected or otherwise.

Chart Reading: Drawing Trendlines

Trendlines are the trader’s guide to visualizing market direction.

Whether it’s identifying an uptrend or spotting a potential reversal, these simple lines are packed with insights.

They highlight support and resistance levels, offering clues for future price movements.

Practice makes perfect — start adding trendlines to your charts today!

Strategy: Trend Following

Trend following is a strategy that aligns with the market’s momentum, allowing you to ride the wave until it breaks.

This strategy is a favorite among traders because it minimizes emotional decision-making and capitalizes on clear market movements.

Mindset: Setting Goals for Novice Traders

The start of a new year is the perfect time to set meaningful goals for your trading journey.

For beginners, the focus should be on building a strong foundation.

This means committing to a disciplined process, preparing thoroughly before each trade, knowing when to stay out of the market, and keeping strategies simple and focused.

Remember, consistency and patience are your allies in this journey.

2025 has begun with a bang, reminding us that markets are as unpredictable as ever.

Whether you’re drawing trendlines, following trends, or setting goals, this year is full of opportunities to sharpen your skills.

And here’s some food for thought — while the Santa Claus Rally didn’t bring the cheer we hoped for, how will this year’s January Effect play out?

Stay tuned!

Until next time, stay disciplined, stay curious, and keep mastering the markets.