Why Last Week's Dip Was a Bear Trap (And What Comes Next)
Volume 163 - The Week Ahead (Final of 2025)
Good evening,
This is my final Week Ahead of the year.
After this, we move into the Year Ahead, which will be out shortly after Christmas.
This was one of those weeks that looked doom and gloom if you only glanced at the closing levels and completely different if you paid attention to how the market behaved while it was under pressure. The S&P finished down 63 basis points, Nasdaq closer to 2%, and on the surface, it looked like a late-year wobble driven by two ugly tech post-earnings moves in Broadcom and Oracle, and thinning liquidity. In reality, the way the market absorbed it tells you far more about where we are headed than the size of the move itself.
Though localised, I think Oracle gave the market a clean excuse to de-risk, particularly given positioning in AI names.. The narrative was obvious and the reaction in growth made enough noise to feel meaningful. But what stood out to me was not the selloff. It was how quickly the selling ran out of oxygen. Credit stayed calm, post-Fed the dollar weakened rather than firmed, volatility was offered rather than chased, closing well off the highs of the week, and index never behaved like it was under genuine stress.
This is exactly where people get caught leaning the wrong way. Late in the year, with positioning elevated and sentiment stretched, it is easy to convince yourself that any drawdown is the start of something larger, especially those, like myself, who suffer some minor PTSD after trading Christmas 2018. But markets that are actually rolling over do not shrug off pressure this cleanly… What we saw last week was not distribution - it was pressure being released in a very specific part of the market while the broader structure remained intact.
As I said earlier, this is the final Week Ahead of the year. Before we turn the page to 2026 and The Year Ahead, it is worth being very clear about what this market is doing, what it is not doing and why the next phase of this cycle is likely to punish anyone relying on surface-level signals rather than understanding the mechanics underneath.