Market Update Into December 16th: Index Divergence Grows

3 mins read

The markets delivered a mixed performance this week, with technology stocks once again standing out thanks to strong showings from major names like TSLA, AAPL, AVGO, and GOOG. However, growing divergences among the indices are beginning to raise concerns. The Dow Jones Industrial Average and small-cap stocks led the decline, while the S&P 500 appears increasingly vulnerable to follow suit. Meanwhile, in other news:

Next week brings the highly anticipated FOMC meeting, with the markets currently pricing in a 97% probability of a 25 basis point rate cut. The question remains: will this be sufficient to revitalize the underperforming indexes, or are we poised for a deeper market downturn? Let’s dig into the charts and see where things ended up.

Weekly Analysis

SPY (SPDR S&P 500)

The SPY ETF continued to show signs of weakness, failing to put in a new high on Wednesday and closing the week lower, at $604.21 (–0.60%). With the GoNoGo Squeeze oscillator at the zero line and the next horizontal support level just below, bulls will be hoping for price stabilization in the coming sessions. A break below the zero line, coupled with a loss of the horizontal support, would signal a significant shift in momentum and the potential for a more pronounced downside correction.

QQQ (Invesco QQQ Trust)

The QQQ took the lead again this week, but only closing slightly higher at $530.53 (+0.76%). In comparison to its peers, the chart appears notably more constructive, with the GoNoGo Squeeze oscillator line well above the zero level and the price comfortably above the nearest horizontal support level. The index’s reaction to next week’s FOMC decision could provide significant insight into the overall market’s resilience as we head into the final weeks of the year.

IWM (iShares Russell 2000)

Unfortunately for small-cap bulls, the IWM ETF was yet again the weakest index of the group, closing notably lower at $233.07 (-2.47%). The orange grid on the GoNoGo Squeeze indicator has now hit the max compression reading, suggesting that the next move will be a powerful one. With this in mind, keep an eye on the blue oscillator line, as the direction it breaks will be a strong indication of where price is headed next. If that move is lower, all eyes will be on the summer highs, around $225.

Earnings

Notable Results

AVGO (Broadcom)

EPS: $1.42 vs $1.38 est
SALES: $14.05B vs $14.09B est

ORCL (Oracle)

EPS: $1.47 vs $1.48 est
SALES: $14.06B vs $14.11B est

COST (Costco)

EPS: $4.04 vs $3.79 est
SALES: $62.15B vs $62.08B est

ADBE (Adobe)

EPS: $4.81 vs $4.66 est
SALES: $5.61B vs $5.54B est

AI (C3.ai)

EPS: $(0.06) vs $(0.16) est
SALES: $94.34M vs $91.02M est

AZO (AutoZone)

EPS: $32.52 vs $33.76 est
SALES: $4.28B vs $4.30B est

MDB (MongoDB)

EPS: $1.16 vs $0.69 est
SALES: $529.40M vs $497.76M est

GME (GameStop)

EPS: $0.04 vs $0.00 est
SALES: $860.33M vs $887.70M est

RH (RH)

EPS: $2.48 vs $2.65 est
SALES: $811.73M vs $812.16M est

M (Macy’s)

EPS: $0.04 vs $0.03 est
SALES: $4.74B vs $4.72B est

What’s Happening Now

ADBE (Adobe)

Adobe delivered strong Q4 2024 results, with revenue climbing 11% YoY to $5.61 billion and EPS of $4.81, surpassing expectations. However, a cautious fiscal 2025 revenue outlook fell short of Wall Street estimates, leading to a 14% post-earnings selloff. Despite the dip, analysts remain bullish, with a wave of buy ratings hitting the tape and price targets as high as $700/share—nearly 50% above current levels.

This is an image of all recent analyst updates on Adobe.

MSFT (Microsoft)

Microsoft has been the laggard among the MAG 7 in 2024, with a 19% YTD—trailing Apple’s 29% and far behind the 50%+ returns of AMZN, TSLA, and NVDA. But the year isn’t over yet. Long-term seasonality shows MSFT is entering two weeks of outperformance—an opportunity for a late-year rally as the tech giant looks to close the performance gap in the 11th hour.

This is a weekly seasonality chart of Microsoft.

SMH (VanEck Semiconductor ETF)

Semiconductors have dominated headlines in 2024, driven by the AI revolution and explosive growth in the sector. But can the momentum carry into 2025? Historical seasonality suggests it might. In years following a U.S. election, semiconductor stocks boast one of the strongest performances among sectors, with a cumulative average annual return of 30.1%.

This is a monthly seasonality chart of SMH.

Believe it or not, this is just a fraction of what happened in the markets this week. For a full run down delivered straight to your inbox every weekend, sign up for The Official Trendspider Newsletter!