by Adam Turnquist, Chief Technical Strategist, LPL Research
The S&P 500 clawed back from nearly a 5% deficit in November to finish the month with a modest 0.1% gain. The rebound was fueled by strong earnings, renewed optimism around artificial intelligence (AI), hopes for a Russia-Ukraine ceasefire, and a significant repricing of Federal Reserve (Fed) rate-cut expectations. Consumer strength also came into focus as Black Friday officially kicked off the holiday spending cycle that continued into this week with Cyber Monday sales. The National Retail Federation reported that a record 202.9 million consumers went shopping during this period. In-store shopping was up 3% compared to last year, while online shopping jumped 9%. Even AI played a role, with Visa reporting that nearly half of U.S. shoppers used an AI tool in some capacity for holiday shopping.
The recovery into month-end repaired a lot of recent technical damage. Broad-based buying pressure last week lifted the S&P 500 back above its 50-day moving average (dma) and into its prior price channel. Market breadth and momentum measures also improved. The percentage of S&P 500 stocks trading above their 200-dma rose to 60%. While this reading is relatively low for a market trading near record-high territory, it marked an important step in the right direction after flirting with a concerningly low 50% level in mid-November. The Percent Price Oscillator (PPO) — an indicator based on the relationship between two moving averages — also switched back into a buy position, implying an upward bias to price action.
While last week’s rally was impressive, the rebound stopped short of taking out resistance from the November highs at the 6,851–6,870 range. For now, this leaves the S&P 500 with a concerning trend of lower highs and lower lows since October. Another missing piece of the recovery puzzle has been retail investors, who have not shown up to buy the latest dip. According to VandaXasset data, the retail cohort — who have steadily supported stocks since April — have been de-risking U.S. equity positions since October.
S&P 500 Recaptures its Prior Price Channel
Source: LPL Research, Bloomberg 12/02/25
Disclosures: Past performance is no guarantee of future results. All indexes are unmanaged and can’t be invested in directly.
Defense Takes the Field
Rotation is often called the “lifeblood of a bull market,” and this cycle has largely featured big-tech leadership followed by broader moves into other cyclical sectors. Recently, however, the rotation away from tech has shifted toward defensive areas, marking the first notable sign of risk aversion since the April rebound. The ratio of cyclical to defensive sectors has broken its prior uptrend, and our trend model now classifies cyclical leadership as potentially entering a downtrend for the first time since May. While this could simply be a pullback from elevated levels, the shift warrants close attention — particularly if the ratio chart falls below key support established at the 2024 highs.
Cyclical vs. Defensive Sector Relative Strength
Source: LPL Research, Bloomberg 12/02/25
Disclosures: Past performance is no guarantee of future results. All indexes are unmanaged and can’t be invested in directly.
Seasonal Tailwinds Return
Seasonal trends suggest the late-November momentum could carry forward this month. Since 1950, the S&P 500 has averaged a 1.4% gain in December and finished higher 73% of the time — the strongest positivity rate of any month. When December is positive, the average gain is 2.9%, compared to an average loss of 2.6% in negative years.
However, as the “S&P 500 December Price Progression” chart below highlights, equity market strength typically emerges in the second half of the month. Historically, the index tends to hover around the flatline during the first half of December, with upward momentum building around the 11th trading day, though past performance is no guarantee of future results.
S&P 500 December Price Progression
Source: LPL Research, Bloomberg 12/01/25
Disclosure: Past performance is no guarantee of future results. The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of the predecessor index, the S&P 90.
Conclusion
Stocks have mounted a strong rebound since late November, underpinned by solid fundamentals and a favorable macro environment. Much of the technical damage from the recent pullback has been repaired, with notable improvements in market breadth and momentum indicators. That said, it’s still too early to declare an all-clear. Emerging leadership trends and the absence of retail investor participation raise questions about the sustainability of this recovery. While our long-term outlook for the bull market remains intact, we still see potential downside risks in the near term.
