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Santa’s Rally: Trading the Shortened Holiday Week · The SPY Trader

• 0:00
  Welcome back to Spy Trader .
• 0:02
  I'm your host , Cash Flow Charlie , and it is 5 am on Sunday , December 21st , 2025 , Pacific time .
• 0:11
  We are gearing up for the final full trading week of the year , which is , importantly , a holidayshortened week .
• 0:18
  The markets will be closed this Thursday , Christmas Day , and we’ll see an early close on Wednesday .
• 0:24
  We are entering the highly anticipated ' Santa Claus Rally' window , and today we’re diving into what this light volume environment means for your trades .
• 0:34
  The overall outlook for the short week ahead is Moderate to Mildly Bullish , driven by ongoing positive macroeconomic data .
• 0:42
  Last week , we saw the Federal Reserve continue its accommodative stance , cutting the key rate for the third consecutive time to a threeyear low of 3.5% to 3.75% .
• 0:56
  This dovish outlook was compounded by coolerthanexpected inflation data , with the US CPI report showing annual inflation eased to plus 2.7% , significantly below the 3.1% market estimate .
• 1:11
  These factors create a textbook ‘ Goldilocks ’ environment , which typically supports higher equity prices , especially as we enter the lowvolume , holiday trading period .
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  However , we must address a key contrarian risk .
• 1:26
  Bank of America’s Bull and Bear Indicator recently triggered a longterm “ sell signal ” by hitting a highly elevated level of 8.5 , indicating significant bullish complacency among fund managers .
• 1:40
  While this suggests longerterm caution , the immediate focus remains on shortterm momentum and seasonality .
• 1:47
  The economic calendar is backloaded for Tuesday , December 23rd .
• 1:53
  Traders should watch for the crucial Q3 GDP second estimate , which is expected to confirm moderate growth between 2.0% and 3.0% .
• 2:02
  Also on Tuesday , the Durable Goods Orders and the critical Consumer Confidence report will hit the wire .
• 2:09
  A rebound in confidence , following last month's sharp drop , would be a major lift for Consumer Discretionary stocks .
• 2:17
  In terms of sector performance , Technology continues to drive the bus .
• 2:22
  Megacap AIrelated stocks , like Nvidia , are leading the charge , benefiting from yearend “ window dressing , ” where funds buy up winning stocks .
• 2:32
  We also see continued rotation into two sectors rated ‘ Outperform ’ for the next year : Industrials and Health Care , both benefiting from solid fundamentals and cyclical rotation observed last week .
• 2:44
  Given the seasonal tailwinds and positive momentum , our core strategy remains mildly bullish , focusing on strategic growth and sector rotation .
• 2:54
  First , maintain or slightly increase core exposure to the broad market using the Vanguard S&P 500 ETF , or VOO , to benefit from the general yearend rally .
• 3:06
  Second , capitalize on momentum by keeping an overweight position in the techheavy Invesco QQQ Trust , or QQQ , targeting those continuously leading AI and growth stocks .
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  Third , we recommend a tactical buy in Industrial Select Sector SPDR Fund , ticker XLI .
• 3:26
  This sector stands to benefit most if Tuesday’s GDP and Durable Goods Orders come in strong .
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  Finally , given that BofA sell signal and the potential for increased volatility in lowvolume trading , it’s prudent to maintain a small hedge position in a safe haven like SPDR Gold Shares , GLD .
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  That’s all the time we have for this edition of Spy Trader .
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  Trade smart , trade safe , and enjoy your holidays .