The 2025 Finale: The Rotation to Quality Is Just Beginning, But Do Be Warned…
As I close the book on 2025 strategy, the market feels undeniably heavy. The liquidity drain I warned about in my Robinhood (HOOD) note earlier this month has started to bleed into the broader large-cap indices. While the S&P 500 is holding its ground, the internal rotation telling the real story is one of risk aversion.
We are seeing a clear divergence as we head into the new year. The "growth at any cost" trade is dead. Below, I break down the activity of three critical large-cap movers from mid-December and predict how they will shape the first weeks of January 2026.
NVIDIA (NVDA): The Exhausted Giant
The Activity: Throughout mid-December, NVIDIA struggled to reclaim its November highs, despite a flurry of year-end "window dressing" by fund managers. I watched the stock churn on heavy volume between $135 and $140 without making directional progress. This "churn" is classic institutional distribution—smart money selling into retail strength.
The Prediction: I expect NVDA to break support in the second week of January. The capex cycle narrative is tired, and the market is pricing in perfection for the Q4 earnings print. When the tax-year calendar flips, I anticipate deferred selling pressure to hit immediately. Look for a retest of the $120 level by mid-January as funds rotate into software and services.
Tesla (TSLA): Buying the Rumor, Selling the News
The Activity: Tesla has been the standout performer of the last two weeks, rallying 12% on rumors of a blowout Q4 delivery number. The options market is currently pricing in massive volatility for the first week of January. I view this rally as entirely speculative; it lacks the fundamental backing of margin improvement.
The Prediction: This is a textbook "sell the news" setup. Even if Tesla meets the delivery whisper numbers, the stock is overextended. I predict a sharp correction starting January 5th. The reality of EV demand saturation in China will outweigh the delivery headline. I am looking to short any pop above current levels, targeting a slide back to the 50-day moving average.
Amazon (AMZN): The Sleeping Safe Haven
The Activity: While the high-beta names grabbed headlines, Amazon quietly outperformed in the second half of December. The stock showed remarkable relative strength during the mid-month dips. I attribute this to institutional accumulation. Investors are parking capital here because the AWS margin story provides a safety net that pure-play AI hardware stocks currently lack.
The Prediction: Amazon will be the "flight to safety" trade of January 2026. As volatility spikes in NVDA and TSLA, I expect capital to flow into AMZN. I predict a breakout above resistance in the first three weeks of the year, driven by pre-earnings optimism. This is one of the few long positions I am comfortable holding through the holiday break.
In Summary
Tesla displays the highest volatility; it spikes 12% on late-year speculation before crashing in a "sell the news" event after January 5th. NVIDIA acts as the laggard. It churns sideways through December and breaks key support levels in the new year as buyer exhaustion sets in. Amazon serves as the clear "flight to safety" beneficiary. It maintains a steady upward trajectory in December and accelerates in January as funds rotate out of riskier assets. The S&P 500 remains largely flat during this period; this stability masks the aggressive reallocation occurring beneath the surface.
Projected Performance Dec 15 - Jan 15
Projected Performance: The 2026 Rotation to Quality X-Axis: December 15, 2025 – January 15, 2026 Y-Axis: Relative Performance (Indexed to 100 on Dec 15)
Do not let the low volume of this holiday week fool you. The market is fragile. The aggressive selling we saw in HOOD was just the opening salvo.
For the first weeks of 2026, I predict a "mean reversion" January. The winners of late 2025 will face profit-taking, and the neglected value plays will catch a bid. My strategy is simple: sit on cash, let the volatility shake out the leverage, and wait for the fat pitches in late January.
Happy New Year. Stay disciplined.