Trade Ideas Post - FOMC Market Outlook
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71.43% Win Rate • $93,919 Profits • 14.80x Profit FactorFOMC Dec 10, 2025
Key Highlights
- Third consecutive 25bps rate cut delivered
- Powell: "We are well positioned to wait and see"
- Rate HIKES off the table (removed worst-case)
- IWM hit NEW ALL-TIME HIGH
- VIX dropped -7% (volatility calming)
- Small caps celebrating rate cut benefits
Dec 11 Premarket
- Oracle earnings disappointed: cloud sales missed
- Oracle raised 2026 capex $15B to $50B
- Oracle stock down -12% premarket
- Tech sector pressure: NVDA, AMD down 1%+
- AI investment ROI concerns reignited
- S&P futures -0.4%, Nasdaq -0.6% to -1.6%
4-Year FOMC Rate Decision History
Similar to Dec 2025: Cut delivered but hawkish guidance (only 2 cuts in 2025 projected)
Trump election victory + rate cut fueled small cap rally
Larger than expected cut signaled aggressive easing cycle
Powell signaled 3 cuts coming in 2024 - major dovish pivot
First hold after aggressive hiking cycle - peak rates reached
Final rate hike of aggressive tightening cycle
Aggressive hiking to combat 7%+ inflation
Zero rates era ending - tapering accelerated, rate hikes signaled for 2022
🎅 Santa Claus Rally Analysis 🎄
Last 5 Trading Days of December + First 2 Days of January
Last 6 Years Performance
Historic first: S&P 500 sold off every day between Christmas and New Year. Hawkish Fed + elevated valuations.
Modest Santa Rally. Markets already up strong in Q4 2023.
Small gain after brutal 2022 bear market. Recovery beginning.
Strong Santa Rally despite looming rate hike concerns.
Vaccine optimism, stimulus hopes, post-COVID recovery momentum.
Strong Santa Rally capping exceptional 2019 bull market.
📊 Historical Insight
5 out of 6 years produced positive Santa Rallies (83% success rate in recent history). The 2024-25 miss was the FIRST time the S&P 500 declined every day between Christmas and New Year. Back-to-back negative Santa Rallies have only happened TWICE since 1950, suggesting 2025-26 has strong odds of delivering gains. Russell 2000 (IWM) historically outperforms during December with 78% win rate and 4.3% average positive-month gain - significantly better than SPY or QQQ.
6-Year Santa Rally Performance Comparison
2025-26 Santa Rally Prediction
Why 2025-26 Santa Rally Should Succeed:
- Back-to-back failures are RARE: Only happened twice since 1950 (96%+ rare event)
- IWM at all-time highs: Small caps breaking out = economic optimism = ideal Santa conditions
- Rate cuts delivered: Fed cut 25bps Dec 10, rate HIKES ruled out by Powell
- Strong YTD momentum: S&P 500 +27% in 2025, markets that finish strong historically have strong Santa periods
- Seasonality intact: December is statistically most-likely positive month (79% win rate)
- Window dressing: Fund managers will buy to improve year-end performance presentations
- Low Treasury yields: 10-year at 4.1% makes equities attractive relative to bonds
- IWM historical edge: Russell 2000 has 78% Santa Rally win rate vs 75.6% for S&P 500
Risks to Monitor:
- Oracle earnings sparked AI investment ROI concerns (Dec 11 premarket)
- Tech sector weakness could spread if Oracle signals broader capex pullback
- Fed's hawkish 2026 guidance (only 1 cut vs market expectations for 2+)
- Elevated S&P 500 valuations make market vulnerable to profit-taking
- Low holiday liquidity can amplify moves in either direction
- Government funding/shutdown risks
💡 Trading Strategy
BEST PLAY: Long IWM (Russell 2000)
Historical data shows IWM outperforms SPY and QQQ during Santa Rally periods. With IWM breaking to new all-time highs
and small caps benefiting most from rate cuts, this is the highest conviction trade for the Dec 24-Jan 2 period.
Target: +2.5% to +4% gain over the 7-day Santa window.
Forward Price Predictions
| Ticker | Current | Fri Dec 12 | Mon Dec 15 | Wed Dec 17 | Fri Dec 19 | Outlook |
|---|---|---|---|---|---|---|
| SPY |
$689.17
+0.23%
|
$687-690
-0.3% to +0.1%
Consolidation
|
$690-693
+0.1% to +0.6%
New ATH attempt
|
$692-696
+0.4% to +1.0%
Breakout mode
|
$694-698
+0.7% to +1.3%
Santa Rally gains
|
BULLISH |
| QQQ |
$625.58
-0.32%
|
$623-627
-0.4% to +0.2%
Tech still weak
|
$625-629
-0.1% to +0.5%
Stabilizing
|
$628-633
+0.4% to +1.2%
Recovery begins
|
$630-636
+0.7% to +1.7%
Catching up
|
NEUTRAL |
|
IWM 🚀
NEW ATH
|
$257.80
+1.17%
|
$257-259
-0.3% to +0.5%
Consolidate ATH
|
$259-262
+0.5% to +1.6%
BEST PERFORMER
|
$261-265
+1.2% to +2.8%
Multiple new ATHs
|
$263-267
+2.0% to +3.6%
🏆 CLEAR WINNER
|
VERY BULLISH |
⭐ Key Insight: IWM continues to demonstrate exceptional strength, gaining +1.17% today while QQQ declined. The Russell 2000's sustained momentum above $257 confirms the small cap breakout is real. Historical Santa Rally data (78% win rate, +4.3% avg) combined with current sector rotation makes IWM the highest conviction trade through December 19th. SPY grinding toward $700, but small caps offer superior risk/reward into year-end. QQQ lagging as tech digests Oracle concerns and AI capex questions.
Trading Scenarios
Key Technical Levels
| Ticker | Support Levels | Resistance Levels | Trend |
|---|---|---|---|
| SPY $687.57 | $685, $683 (50-day MA), $680, $675 | $691 (ATH), $695, $700 | BULLISH |
| QQQ $627.61 | $625, $620 (50-day MA), $615, $610 | $630, $637 (Nov ATH), $640 | NEUTRAL-BULLISH |
| IWM $254.81 ATH | $253 (breakout), $250, $247, $244 (50-day) | NONE - $260, $265, $270 next | VERY BULLISH 🚀 |
IWM Technical Strength: Breaking to all-time highs with no overhead resistance creates "blue sky breakout" scenario. Next psychological levels at $260, $265, $270. Strongest momentum of the three indices. Above all major moving averages. Higher highs and higher lows pattern intact.
Risk Assessment
✓ Upside Catalysts
- Powell ruled out rate HIKES (removed worst-case scenario)
- Small caps at ATH signals economic optimism
- Santa Rally seasonality (79% success rate since 1950)
- Window dressing by fund managers into year-end
- Low Treasury yields (4.1% on 10-year) make equities attractive
- Markets pricing more cuts than Fed (68% for 2+ in 2026)
- Strong GDP growth projected (2.3% for 2026)
- Fed balance sheet expansion ($40B Treasury purchases)
- Back-to-back Santa Rally failures are extremely rare
- IWM breakout confirms sector rotation momentum
✗ Downside Risks
- Oracle earnings spark AI investment ROI concerns
- Tech valuations extended after 2-year rally
- Fed hawkish on future cuts (only 1 projected in 2026)
- Delayed economic data creates uncertainty
- Powell's final months = potential policy uncertainty
- Trump Fed chair pick could roil markets
- Year-end profit-taking after +27% YTD gain
- Government funding/shutdown risks
- Holiday low volume can amplify volatility
- China economic concerns persist
Final Verdict
December 10 FOMC was a BULLISH event masked as hawkish. Powell ruling out rate hikes removed downside risk while the 25bps cut keeps the easing cycle alive.
Small caps (IWM) are the clear winners and broke out to all-time highs, signaling a sector rotation: OUT of expensive mega-cap tech, INTO small caps and cyclicals. This is the dominant theme for December.
🎯 Trade the Trend: BUY IWM, Hold SPY, Be Cautious on QQQ
IWM offers the best risk/reward into year-end. Historical Santa Rally data shows Russell 2000 outperforms with 78% win rate and 4.3% average gain. Current breakout to ATH + rate cut tailwinds + sector rotation = high conviction long opportunity.
Santa Rally is ON 🎅🚀
But small caps are leading the sleigh. History strongly favors a positive
2025-26 Santa Rally period after last year's rare miss. With IWM breaking out, Fed cutting rates, and historical
seasonality intact, the setup favors bulls into year-end.
Best Trade Setup: Long IWM on any dip to $253-255, target $260-263 (one week), stop $252. Risk/Reward: 3:1. Entry today if market gaps down creates opportunity. Monitor Oracle impact on tech but stay focused on small cap momentum which has already proven resilient.