Nasdaq 100: 2 Most Important Market Price Levels to Watch in 2025
2024.12.30 04:33
Don’t ignore the flood of annual market outlooks, forecasts, projections, and year-end targets. While most of them will likely be wrong.
I’m about to show you how you can make them infinitely more valuable with a market mechanism that will tell you which prognostications are likely to be correct and which are not.
On the first day of every trading year, the market starts to tell us what it’s likely to do next, and very often, it’s not what the majority of investors have in mind going into the new year.
Markets tend to fool most people most of the time, but January is one of several months that can help anyone avoid that fate.
With the application of this market analysis mechanism:
- Retail investors will have a roadmap for how and when to trade with the discipline and confidence of a pro.
- RIA’s will make better, more confident decisions and provide clients with clearer explanations to questions of “why, when, and for how long” the market trends will persist, for better or worse.
- Institutional traders will have better inputs into the base case for placing bigger and better market beating bets.
You’ll see how you could have used January to avoid the market collapse in early 2022, be confidently bullish in January 2023 (near the bear market low), and continue to be bullish as the market climbed higher in 2024.
The predictive quality of January and this mechanism is powerful, but one of the biggest benefits of this is how it enables you to manage your risk.
This Is Different
The popular “January Effect” and “As Goes January” stats and patterns are good ways to model market behavior, but they are very different than the January Calendar Range Trend Trade (JTT) mechanism that I’m about to share.
For example, the January Effect assumes weak stocks (potentially due to tax selling) at the end of the year will tend to rally in the beginning of the next year. The MarketGauge January Trend Trade (JTT) doesn’t assume that but will give you a way to capture it if and when it happens.
The “As Goes January” adage assumes the direction of some initial time period within January (5 days, the whole month, etc.) will predict the direction of the whole year.
The MarketGauge January Trend Trade (JTT) doesn’t assume that but will give you a way to capture it if and when it happens.
What About the Santa Claus Rally?
Before we jump ahead to January, it’s worth maintaining the continuity of previous weeks’ market messages because if you get nothing else out of this weekly column, it should be that the market sends messages to those who chose to listen.
On December 15th, we announced, “The Santa Claus Rally Under Attack,” with the momentum in rates in a narrowing market being a credible threat to the hopes that Santa’s seasonally bullish last two weeks of the year would rally.
Last week’s “” highlighted more trouble for Santa’s rally but offered a glimmer of hope, including a short list of stocks that might continue to celebrate.
However, with only two trading days left in the year, the hopes and predictions of a 2024 Santa Claus rally have been all but dashed.
As you can see by the chart below, the only major index in the green for the month is the . Friday didn’t have any news to justify its weakness, and trading volumes were expectedly light. Without unexpectedly bullish news, there’s little reason to expect Santa to show up at the last minute.
As we pointed out at the beginning of the month, the bearish trend in the bond ETF, , was likely to be indicative of headwinds for stocks.
This bearish trend in the bonds persists, but now there is a new focus – January.
How To Make Wall Street’s Targets & Predictions More Valuable
It is the season for analysts to offer their targets and predictions for 2025.
Below you’ll find a recently published optimistic chart of this year’s ideas for 2025.
As you can see, all but one, are higher than the market’s current price. The median expected gain is about 10%.
For what it’s worth, right before the market peaked in late 2021 the average of the expected returns for 2022 was also a gain of about 10%. In 2022, the closed the year down about 19%, far surpassing the most bearish prediction of negative 6%. So in 2022, the predictions misjudged the downside by about 29%.
After missing the bear market in 2022, the consensus among analysts remained positive, albeit muted, with an average expected gain for 2023 of less than 5%. In this case, the most bullish prediction was 4500 and the market reached slightly over 4,600 before pulling back but still closed with over 25% gain. So in 2023, the predictions missed the upside by about 20%.
With a bull market underway by the end of 2023 (although not widely appreciated), analysts again predicted a low single digit year for 2024, with the most optimistic target being a 13% gain.
As you know, we’re sitting on a gain of around 25%, so again, in 2024, the average of the prediction missed the upside by about 20%.
Prognostications Can Be Useful When You Use Them This Way
I’m not critical of analyst predictions. It’s an impossible task to get the direction, size of the move, and time in which it happens all correct looking out over a year.
Nonetheless, I’m very grateful for their work, including our very own Market Outlook for 2025 by Mish.
The MarketGauge January Calendar Range Trend Trade (JTT)
If you receive our email, then you’ll be hearing more about the Calendar Ranges and the January Trend Trade, which is one specific application of the Calendar Range mechanism.
Here I’ll guide you through how this simple yet powerful method of letting the market in any instrument (index, stock, ETF, commodity, etc) reveal which direction it’s inclined to move.
So, with respect to all of the predictions for 2025 that you’re reading about, you can simply use the January Calendar range to confirm when or if the predicted move is, in fact, underway and act accordingly.
For example, I’m inclined to believe the bullish outlooks, but until the markets are able to confirm a break above the January Calendar range high, the trend is not on its way higher.
Furthermore, the best way to approach January is to treat it with as little bias as possible.
For example, if stocks begin 2025 with a confirmed bearish breakdown of the January Calendar Range, then the market is bearish until the range low is reclaimed, and more importantly, the Calendar Range high is exceeded.
The chart of the QQQ in 2022 below shows how the January Calendar Range low not only represented a clear development of a new bearish trend but also proved to be the infection points that ended the market’s first (in late Jan.) and second (in March) attempts to rally that year.
After a very bearish 2022, it was hard to find bulls looking for anything more than a bear market bounce, much less a sustained bull market to begin in 2023.
The Calendar Ranges don’t predict how far a market will move in your favor, but when you use them with the right risk management tactics, they enable you to enter trends that are likely to continue with very definable risk.
Furthermore, the power in these ranges’ ability to identify big trends is a function of how markets work.
It’s not a coincidence that the bear market of 2022 started in January or that there was an easy entry into the current bull market in January 2023 and 2024. More on that later.
The chart below shows how once the QQQ traded over the January Calendar range high in 2023, it never traded below it. This marked a great entry into what has become a substantial bull market.
Here’s 2024. It’s not uncommon for markets to retrace to these range levels. As you’ve seen, it’s happened in every one of the last 3 years in bull and bear market conditions.
Predicting The Market With Calendar Ranges – It’s As Simple As Hitting A Baseball
I just handed you a proverbial baseball bat, and I’m telling you that you can hit a home run with a few simple rules.
First, if you’ve ever watched a young child be coached on how to use a baseball bat, you undoubtedly heard the words, “Keep your eye on the ball.”
Sounds like insultingly obvious help, but you’d be surprised how many players don’t do it the right way.
In fact, that same advice is relevant all the way up to the pros, where batters look at where and how a pitcher releases the ball, the spin it has on it, and more.
You’re playing in the big leagues, so…
The ranges are your price points to trade around. Next, you have to keep an eye on how the market trades around them, and don’t swing at every pitch! This is true even if you’re not literally trading but instead using the levels to determine the market’s trend.
For example, everyone I hear prognosticating about 2025 has said “…it’s going to be volatile…”
What if you’re an RIA that wants to know more than “volatile,” such as whether you should have a bullish, neutral, or bearish bias in 2025?
If you look at history, you’ll find that there are a few simple rules you can apply to these ranges that will do everything suggested above…
- Retail investors will have a roadmap for how and when to trade with the discipline and confidence of a pro.
- RIA’s will make better, more confident decisions and provide clients with clearer explanations to questions of “why, when, and for how long” the market trends will persist, for better or worse.
- Institutional traders will have better inputs into the base case for placing bigger and better market-beating bets.
Like most things related to the market, this is easy to get started and difficult to master. The more complicated uses include reversals and retracement patterns and combining them with other indicators.
A few easy rules to look for are:
- If the market trades significantly over the January Range high it is bullish until it trades back down below it. The range level is a price point, but for analysis, it should be considered an area. Use tactics for confirming a “range break.”
- If the market trades below the January Range low it is bearish.
- These levels are relevant ALL YEAR. They can be especially relevant later in the year if they are being breached for the first time.
- You will see that we recommend using our Triple Play Leadership indicator as a confirming condition for a breakout or breakdown.
- This analysis becomes much more powerful when applied to related instruments for confirmation. For example, if you are looking at the SPY, look for the QQQ to be doing the same thing. Also consider IWM, DIA (BME:) and TLT. Is your stock, ETF or market index in agreement with the Calendar ranges of instruments that should be confirming trends?
Why is January So Powerful?
2024 was a bull market right from the beginning of the year. It moved lower briefly in the first 10 days of the year but then traded over its January calendar range high around January 19th and never looked back.
Despite this bullish environment, 9 out of the 10 of the WORST performing stocks did not trade substantially above their January highs after trading below their January lows.
This is not surprising because markets with momentum tend to have trends that persist. At MarketGauge, we have several trading models that profit from this persistent momentum edge by simply identifying when this edge exists and applying risk-managed trading strategies to it. We don’t use this January range as the edge in these models, but the January concept is just as powerful.
Markets are very focused on the calendar, and momentum can be easily influenced by and be aligned with the calendar. When stocks are having a good year or a bad year, that trend has proven itself to be hard to completely reverse.
I repeat, even in this year’s historic bull strength, 9 out of 10 of the WORST performing Nasdaq100 stocks did not trade substantially above their January highs after trading below their January lows.
A good example of this is , which is a tech stock, leveraging AI that gained over 75% in 2023, so it came into 2024 as a star performer.
However, as you can see in the chart below, even though it got off to a good start, once it fell below its January high it was no longer bullish.
When it broke down below its January low it collapsed. When it rallied it stopped at the January range and could not get back above its January high.
I’m using a bearish trend as an example because, in a bull market, it would be easy to find examples of persistent bull trends. This trend defied even a strong bull market in tech stocks.
On the bullish side of the market, not surprisingly, NONE of the top 10 best-performing stocks in the Nasdaq 100 traded substantially below their January high after trading above it.
The January Calendar Range will tell you which prognosticators will be right or at least have a chance to be right.
Be Ready For 2025
Now you know. If markets trade below their January Calendar Range Low, watch out. If they trade higher, there’s a low-risk setup to be a buyer.
If you’re advising clients, this simple rule of thumb will keep you on the right side of every major move for the calendar year.
Beware, our calendar range low is NOT always the low as of Jan 31st. We look at 10 trading days with some caveats and confirmations to improve accuracy.
The simple edge here is that the trend of the year matters, and you can easily identify the levels at which trends accelerate or reverse.
One Last Improvement for The More Advanced Trader.
Our brains don’t just look at the market in time frames of years. Quarters, halves, and even months are important and there are edges in those time frames too.
When you hear us referring to Calendar Ranges, there’s more to it than just January, but don’t ignore January.
