Green Lights on Liquidity, Froth on Sentiment: Staying Cautiously Bullish

December 21, 2025 - Update

Well, last week inflation came in better than expected at 2.7% YoY, which is a good sign going forward. The current forecast for the December number sits at 2.6%.

Nonetheless, the 10-year Treasury yield is still hovering around 4%, so the market is still expecting inflation to stay resilient over the next few months.

All in all, credit conditions and liquidity are flashing a green light.

As mentioned many times, stretched short-term valuations and elevated sentiment can still create volatility in the near term.

The NAAIM Exposure Index is around 100 right now, signaling potentially overbought conditions. Historically, it often cools off after readings near that level.

Definition: The NAAIM Exposure Index is a weekly sentiment indicator that represents the average U.S. equity exposure reported by NAAIM members. naaim.org

I stay optimistic in the mid-term, and I’m open to seeing corrections in the coming weeks. I’m not predicting a correction (or else) next week.

It could still be a good week, as seasonality may help and we might get the “Santa rally.”

Definition: The “Santa rally” is the tendency for stocks to rise during the last five trading days of December and the first two trading days of January.

INDEX

The S&P 500 closed +0.1% for the week. We’re clearly in an uptrend, yet the MACD just crossed from above to below the signal line, which typically suggests weakening momentum.

This is an environment that still allows you to stay “in the market,” but it’s been choppy. Caution is a good strategy right now.

PORTFOLIOS

10X MOMENTUM PORTFOLIO

Last week was shaky in terms of volatility, and I was stopped out of three positions: ASND (-1.7%), NU (-10.5%), and FIX (+78%). Now I’m left with KRYS only, as shown below.

This week I’m issuing a BUY STOP order for 45 shares of AFRM at $76.50. If triggered, my initial stop-loss is $64.

Affirm Holdings, Inc. operates a payment network in the United States, Canada, and internationally. Its platform includes point-of-sale payment solutions for consumers, merchant commerce solutions, and a consumer-focused app.

AFFIRM chart notes: MACD is turning up. Relative strength just crossed the long-term moving average from below. It popped +13% on volume last week.

Fundamentals: The company is showing improving profitability metrics and margins. Valuation looks slightly undervalued if revenue growth stays above 20% over the next two years.

10X UNDERPRICED GROWTH

Not touching it this week. I’m left with one stock only → BTSG, which is up 10%.

As mentioned, I will close this portfolio definitively as soon as I am stopped out of BTSG.

That’s all for the week. Let’s see if Santa comes to stock market town this year — or not! Happy holidays to you all!

All the best!

_
Important: this is not investment advice. Consult a licensed financial advisor before making any investment decision.