Remember that moment when you thought the party was finally winding down, only to walk back into the room and find everyone doing shots at 2 a.m.? That’s pretty much what last week felt like in the stock market.
While most of us were carving turkey and arguing with relatives, the S&P 500 decided to wake up and sprint almost 4% higher in four trading days. Not a gentle drift – a proper face-rip that took us right back to the highs we were questioning just two weeks ago.
And honestly? I’m not even surprised anymore.
The Pain Trade Is Still Higher – And It Hurts So Good
There’s this phrase on trading floors that gets thrown around when the market refuses to do what literally everyone expects it to do: the pain trade. Right now, the most painful thing for the largest number of participants would be a relentless grind higher into year-end. And that, my friends, appears to be exactly what we’re getting.
Let me break down why the setup for the next four to six weeks looks ridiculously constructive – even if half of Wall Street keeps waiting for the rug pull that never quite arrives.
Corporate Buybacks Are Back With a Vengeance
If you’ve followed markets for more than a cycle or two, you already know the dirty little secret: since the early 2010s, corporate share repurchases have been the single largest source of net buying in U.S. equities. Not retail. Not foreigners. Not pension funds. Companies buying their own stock.
Think about that for a second.
Earnings season ends, blackout windows lift, and suddenly there’s a structural bid of $5–6 billion per day flowing into the market. That’s not hype – that’s Goldman Sachs’ actual estimate for the next few weeks. In a low-volume holiday environment, that kind of firepower moves the tape.
When companies become the marginal buyer again, price discovery tilts heavily to the upside. It’s simple supply and demand with a corporate credit card.
The CTA Flip – From Headwind to Tailwind Overnight
Systematic trend funds – the infamous CTAs – spent most of the early November correction short or flat. As prices broke back above key moving averages last week, those same funds were forced to cover and then chase. That mechanical buying added rocket fuel to an already oversold bounce.
In my experience, when the machines flip from net sellers to net buyers, the move can run farther and faster than almost anyone anticipates. We saw it in 2020, we saw it in 2023, and we’re seeing it again right now.
December Seasonality Is Real (And Ridiculously Consistent)
People love to mock seasonality as voodoo. Until you look at the actual data.
Since 1950, December has been positive roughly 75% of the time for the S&P 500. When the index is already up double-digits year-to-date – which we obviously are – that win rate climbs even higher. Add in the “Santa Claus rally” (the last five trading days of the year plus the first two of January) and you have one of the most reliable edges markets offer.
- Mutual funds window-dress their winners
- Underperforming managers chase performance
- Bonus money hits retail accounts in January
- 401(k) contributions reset
- Everyone is in a good mood (or at least pretending to be)
Call it behavioral finance, call it herd behavior, call it whatever you want – it works more often than it fails.
Retail Keeps Buying Every Single Dip
One of the most fascinating charts I’ve seen this year shows cumulative flows from investors under 40. The “buy-the-f***ing-dip” mentality is now embedded at a generational level. Every 5-10% pullback gets met with a tsunami of retail buying within days.
That reflexive dip-buying creates a behavioral floor under the market that simply didn’t exist in prior decades. Until that psychology finally cracks – and it will someday – dips remain gifts.
Earnings Fears Got Put Back in the Bottle
Heading into Q3 reporting season, the narrative was that margins were going to collapse and guidance would be slashed. The exact opposite happened. Beat rates came in above average, revenue surprises were solid, and forward commentary stayed cautiously optimistic.
More importantly, the AI spending train shows zero signs of slowing. If anything, the recent pullback in the usual suspects gave management teams the perfect excuse to talk their book at lower valuations. Mission accomplished.
The Fed Put Is Alive and Well
Prediction markets are pricing an 80%+ chance of a December cut. Inflation prints keep cooperating. Growth indicators haven’t rolled over. The dreaded “higher for longer” crowd has gone strangely quiet.
Lower yields act like rocket fuel for duration-sensitive parts of the market – technology, growth, real estate, you name it. The bond market vigilantes took Thanksgiving week off, and equities happily filled the void.
Technical Picture Cleaned Up Beautifully
Early November gave us exactly what the market needed: a quick, sharp correction that took the most overbought readings off the table without breaking the primary uptrend. The S&P kissed its 100-day moving average, bounced hard, and is now threatening all-time highs again.
Volatility (VIX) dropped from the upper 20s back into the mid-teens. Breadth improved but still isn’t euphoric – which is actually healthy at this stage. Momentum signals flipped back to buy.
In other words, the market did its laundry and is ready for the next leg.
Yes, Risks Still Exist – They Always Do
Let’s not get carried away. Valuations are stretched. Concentration in the Magnificent Whatever-Number-It-Is-This-Week remains extreme. A surprise inflation print or geopolitical shock could absolutely change the mood overnight.
But here’s the thing I’ve learned after two decades in these trenches: markets can stay overvalued, overbought, and “over-believed” far longer than any rational person believes possible. Especially when the structural buyers I mentioned earlier keep showing up every single day.
The market can remain irrational longer than you can remain solvent – but in bull markets, it’s usually the bears who run out of capital first.
Key Levels I’m Watching Into December
| Support Zone | Level | Why It Matters |
| Near-term | 6,725–6,750 | 20 & 50-DMA cluster |
| Stronger | 6,570 area | 100-DMA & prior breakout |
| Major | 6,175 | 200-DMA – trend change level |
| Resistance | 6,867–6,909 | Previous highs |
| Psychological | 7,000 | Round number magnet |
As long as we stay above that 6,700–6,725 zone, the bulls remain firmly in control. A decisive break below would shift the odds toward deeper consolidation – but that’s not the base case right now.
The Bottom Line
We just watched the market do exactly what it’s done during almost every year-end period for the past decade: correct hard enough in October/November to shake out weak hands, then rally into Christmas while the bears cover and the skeptics capitulate.
Could something break the script? Of course. Markets love to humiliate the consensus when everyone finally believes the same story.
But right now, every major tailwind is aligned: buybacks, seasonality, technicals, retail flows, systematic funds, and a friendly Fed. The path of least resistance – and yes, the pain trade – remains higher.
So if you’ve been waiting for the “all clear” signal to put money to work, congratulations. The market just rang the bell.
Just don’t forget to take something off the table when everyone you know is finally convinced the rally will never end. Because that’s usually when the music stops.
Until then? Enjoy the ride.
