Market Warning Signs and the 2025 Stock Reshuffle Opportunity
As the market weakened into the close yesterday, we observed some noteworthy items that could be signaling a shift in sentiment.
While the S&P 500 (SPY) remains above the critical $585 level, maintaining a slightly bullish outlook, the market is flashing warning signs that things could get dicey any moment.
Looking at the extended pre- and post-market trading activity (highlighted in orange on chart), you may notice something interesting:
- Over the past week, the S&P’s break-even performance has been largely supported by overnight moves (those who follow me won’t be shocked by this)
- During regular trading hours, 4 out of the last 5 sessions have been bearish, suggesting that optimism is eroding during core market hours.
This pattern — where institutional order flow props up the market overnight only to see regular trading hours dominated by selling pressure — indicates a market environment searching for reasons to sell. If this trend continues, it could signal fading broad optimism and a potential shift toward more bearish conditions.
And, once again, I think a break below the $585 level on the SPY (with a weekly close below) would be a pretty strong sign that the bears won the short term battle and will send us 3-5% lower on a correction.
The 2025 Stock Reshuffle
Despite these warning signs, the current environment also presents opportunities. This month marks the start of the 2025 Stock Reshuffle, an annual period where Wall Street reallocates billions of dollars from last year’s underperformers to this year’s potential winners.
Historically, this reshuffle has led to significant buying sprees, as investors position themselves for the year ahead. For traders, this presents a golden opportunity to capitalize on high-growth plays and target outsized returns.
Remember, in the last week of December, billions were pulled out for tax harvesting (I did some myself!). Now, much of that capital will be redeployed into other assets.
Why the Reshuffle Matters
- New Year Capital Flows: Billions of dollars are expected to shift, creating strong momentum in specific stocks.
- Underperforming stocks could take further hits as institutions and retail traders pulled liquidity at the end of 2024 and cannot redeploy into the same assets (due to the wash rule) and probably don’t want to.
I am focused on this rotation in a number of ways, but I particularly like the idea of using Jump Trades here.
I’ve been on the sidelines for a few weeks with the strategy waiting for more liquidity and momentum to enter the market, and I think this capital deployment gives us that opportunity.
The cool thing is that we can target some really nice wins on options (like 200%+ most of the time) even on smaller moves. So we don’t need a runaway stock, we just need a little rotational momentum to go for those trades.
We’ll cover:
- How to spot the strongest beneficiaries of Wall Street’s capital flows.
- Techniques to maximize returns during the reshuffle.
- Strategies to mitigate risk as the market makes up its mind in the short term.
Final Thoughts
While the market’s recent behavior raises red flags, it also sets the stage for traders to take advantage of shifting dynamics. By focusing on the 2025 Stock Reshuffle, you can position yourself to ride the wave of Wall Street’s buying spree and target significant returns in the months ahead.
Don’t miss this opportunity to align with the market’s next big moves — join me HERE to learn how to make the most of this unique trading environment.
Happy trading,
Nate
