January Rally: Superstition or Setup for the Next Rotation?

Wednesday's New Years Eve sell-off looked like a cash raise more than anything else. The sudden rush for the exits, caused the $VIX to spike to the 15 level. 15 is relatively, and historically low. That's not a trap; that's the market telling you "the coast is clear".  

Ringing In the New Year on a Bullish Note

Wall Street always looks for a January rally, to set the mood for the new year. The boring stats Grok/ AI loves: Historically, the S&P rises ~60-65% of Januarys avg. +1%, and when it does. This classic January Effect is strongest in the Russell 2000 small caps historically +3-5% avg. in Jan, and guess which sector has already pulled back into the perfectly bullish setup? Keep reading...     

Money managers are going to be forced to chase this monster rally; if they don't want to be replaced by AI trading computer algos. That sets up for an extreme case of FOMO, as money get's put to work in 2026, as we're already seeing in Europe.  

The next bullish sector rotation is back into beaten up European stocks, and US small caps. You may have already read the script on this play as it's been telegraphed from several different outlets. Google "european stocks", and you'll see what I mean (many sources).  

Talk is cheap, so let's see what the charts say! 

Animal instincts are spurred in early morning trading as the $FTSE  (pronounced "footsie") breaks out above the 10k mark. 

There are leveraged Europe ETF's, but I'm not sure what they really track. I'm zeroing in on a fund that's already corrected; the same one I pointed to last week. One that's already ripe.   

$OGLIX Oppenheimer Global. Consolidates for 5 months, flash crashes 10%. That's a buy the dip moment, if I've ever seen one. Just traded into the lower end of a perfectly drawn parallel channel. Buy the lower channel line, or wait for breakout back above the 91 level, you decide... 

Note: There is a 3X leveraged Europe (UK) ETF $EURL, but I'm not sure what that really tracks. Due diligence is warranted.  

The other bullish setup I mentioned earlier. A sector which has been quietly taken down, as the lame stream media tries to distract you with Santa Claus rallies, and shiny silver squirrel stories?

$IWM Russell 2000 small caps - word of warning, never buy this junk when CNBC recommends it, because if you do... you're likely to be caught in a nasty bull trap. Instead wait for the "all clear", on the first day of the year, at a perfect 38.2% Fibonacci retracement, and then wait for the green arrow signal. 👇    

Who was calling for 10% moves in Silver months ago? Spoiler @3xtraders  [link] 

My exact quote from Sept: 

A 1% move in Silver is nothing. I wouldn't be surprised to see a 10% move in Silver, after some of the meme trading we've witnessed over the past few years.  

Happy New Year 

P.S. If you're interested in doing a deeper dive into European stocks, here's an interesting article I came across when doing some of my own due diligence yesterday.  European Market Vs. The US Market - Where Should You Focus In 2026? (seekingalpha.com)  

P.P.S New Year's Resolution: Alwuays keep 'em guessing.

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