/ January 12 / Weekly Preview
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Monday:
N/A
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Tuesday:
Core Inflation Rate YoY (2.7%)
Inflation Rate YoY (2.7%)
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Wednesday:
PPI MoM (0.3% exp.)
Retail Sales MoM (0.4% exp.)
Existing Home Sales (4.2M exp.)
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Thursday:
Initial Jobless Claims (219K exp.)
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Friday:
N/A
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Monday:
N/A
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Tuesday:
J P Morgan Chase & Co
The Bank Of New York Mellon Corporation
Delta Air Lines, Inc.
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Wednesday:
Bank of America Corporation
Wells Fargo & Company
Citigroup Inc.
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Thursday:
Taiwan Semiconductor Manufacturing Company Ltd.
Morgan Stanley
Goldman Sachs Group, Inc. (The)
BlackRock, Inc.
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Friday:
PNC Financial Services Group, Inc. (The)
State Street Corporation
Regions Financial Corporation
So Goes January, So Goes The Year
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Markets started the year with positive albeit sloppy trading. SPY is up +1.59% to cap off the first trading week of January, but trails both gold (GLD) and commodities (DBC).
Strength in Energy (XLE) and Financials (XLF) was the main driver of the advance, as well as a tendency for the Value factor to outperform both Growth and the S&P 500. This rotation is a theme we have previously covered, and we’re now looking at some decisive evidence the trend is turning. This is great news for the general breadth of the market, which is set to benefit (as well as ticking off a box from the bearish rhetoric).
This shift is occurring in the context of outflows from U.S. equity funds (especially as international investors pull capital), and some institutional caution. However, this does not mean performance was immediately impacted. Seasonal tendencies have manifested yet again, with the first five trading days of January turning positive.
So goes the first week, so goes the month.
So goes the month, so goes the year. Or so the saying goes.
Carson Research shows that historically, when the S&P 500 posts a gain in the first five trading sessions, the index ends the year higher about 80 percent of the time. The reasoning is simple - strength early in the year reflects broad investor optimism.
Optimism is also present in the very early return prints for our trading systems. Millennium Alpha has kicked off 2026 with +5.2% returns, with the other models not trailing far behind.
Some caution is still warranted, especially as it pertains to geopolitical risks and uncertainty around monetary policy. On Friday, the latest jobs report revealed slower payroll growth than estimates (50k jobs vs 60k jobs expected). These are not numbers that scream “roaring economy” in the same way the stock market is putting out record returns. The main problem with the headline figure is that payroll growth is now below labour force growth, creating an unsustainable dynamic (less jobs are being created than people entering the workforce).
However (and here’s where a familiar disconnect occurs) the market sees these numbers as “good news”, since it translates into less pressure on the Fed to keep rates elevated. Translation: weaker economic growth equals more monetary accommodation. Bad news is good news (but so is good news).
In any case, the weaker jobs print boosted rate cut expectations and is supportive of lofty equity valuations. The Fed now only needs soft inflation figures (due tomorrow) to keep a more dovish tone going.
From a technical perspective, the bulls are clearly in control. On Friday, the market set another record high, continuing the mildly positive trajectory that remains in place since October. There have been no sell signals recorded lately, and the market is not overbought either (on a moving average deviation basis).
Support lies at $678 (M-Trend), with resistance shaping up at $716 (R1). GEX is positive on all timeframes. The fact that SPY trades above all moving averages and previous retracements to the 20 and 50 DMAs have always found buyers is a hallmark of bull markets.
As mentioned before, the Growth -> Value rotation is benefiting market breadth figures, as notable improvements are being recorded in the number of stocks trading above all key averages (study link).
Expectations for future growth remain stable, with option pricing implying continued upside, despite prices which are drifting higher overall. Volatility is near record lows, indicating that investors are not pricing large near-term swings.
Combined upside for major Sectors ETFs (lower panel in chart below) is above historically “high” values - a posture normally associated with bottoming formations or bull markets more broadly. On this indicator, a reliable sell signal is triggered once upside becomes very low (3% or less). Right now, long term expectations are for gains in the vicinity of 7%, a number that leaves room for a bull run.
Overall, the S&P’s advance lacked strong momentum expansion, but the technical support remains intact, and the market’s inability to push convincingly to new highs suggests a battle between profit‑taking and fresh buying remains.
The second full week of January will mark the start of Q4 2025 Earnings Season, as major banks start reporting. Key economic releases include the Consumer Price Index (CPI) and the Producer Price Index (PPI), which are among the most market‑sensitive events. The focus will be on the trend in inflation numbers, which will influence the Fed’s pace of future rate adjustments.
Any unwanted surprises in CPI, PPI, or labor indicators will drive volatility in equities, rates, and the U.S. dollar. Real-time inflation trackers like Truflation are showing a sharp decline since mid-December to an estimated 1.87% reading (note: Truflation is usually a leading indicator and the official data catches up later).
Our Trading Strategy (Sigma Portfolio)
Our strategy is to remain allocated to risk assets in the Sigma Portfolio for the foreseeable future at or above target (60%+). We will make some position adjustments to the equity composition of the portfolio and we’ll look to rotate out of commodities into even more stocks. Preferably small and mid caps.
Bonds are there to hedge volatility (and they did a pretty good job at that in 2025), while a small cash position is also fine in order to exploit a dip, should it occur.
As always, we’ll follow the general framework set by our investing models to guide the process, especially tomorrow’s Enterprise rebalancing process.
With this being the last newsletter of 2025, I would personally like to thank you for supporting our small research platform! It means the world to us, and we would not be able to fulfill our mission for broadly accessible smart investing without your contribution! Several exciting updates will come in 2026, as well as better documentation, user guides and even webinars!
I wish you all a Merry Christmas, joyous holidays with your loved ones and a Happy and Prosperous New Year!
Signal Sigma Research & PRO members will be notified by Trade Alert of any live portfolio changes (if subscribed). If you’re not on this plan yet, you can get a free trial when you join our Society Forum. If you need any help with your trading strategy (or would like to implement one on your account), feel free to reach out!
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I am not a financial advisor licensed in the United States. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject to change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this blog post.
I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter. Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.
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The primary purpose of this blog post is to share industry expertise and research and receive feedback (confirmation / refutation) regarding my investment theses.