The S&P 500 is gradually approaching the 6,936 support level, which is being tested in premarket today. Swing traders should be cautious as New Year repositioning may start this Friday. Watching market breadth could provide some insight.

Trading Strategy for Investors

For trading strategy, keep an eye on ES movement between the low 6,920s and 6,936, as well as the high 6,950s. Avoid committing too much to long positions, as there could be continued selling of 2025 winners. Don’t get stuck in stocks that seem to stabilize before year-end. Instead, be selective and aim to take quick profits. Today’s premium stock market analysis is available for review, offering insights similar to those shared with Trading Signals and Stock Signals clients. Prioritize establishing 6,936 as solid support and locking in gains to protect against potential sell-offs on Friday. Focus on leading tickers and sectors like XBI, XRT, and XLV. High beta stocks such as TSLA, PLTR, and HOOD might struggle if Friday brings more than just tax adjustments. Keep an eye on strong sectors and the performance of tech stocks, which appears less favorable right now. The S&P 500 has dipped to test the 6,936 support level after a robust final quarter. We witnessed the index jump over 10% in the last two months of 2025, mainly due to expectations of Federal Reserve rate cuts in the new year. This support test is crucial as we head into the repositioning for 2026 this Friday.

Expectations for the New Year

We should expect some selling pressure on Friday for stocks that led the 2025 rally. This profit-taking can affect high-fliers in technology and retail, such as TSLA, along with sectors like XRT and XBI. For derivative traders, this suggests considering short-term puts or selling call spreads on these winners to profit from a possible pullback. At the same time, be cautious of brief rallies in stocks that underperformed throughout 2025. These often signal window dressing and the end of tax-loss selling as the year wraps up. Chasing these movements with call options could be risky, as underlying weaknesses are likely to return in January. Volatility has been notably low, with the VIX hovering around 13 for most of December 2025, which hasn’t happened since before the market shifts of the early 2020s. This low level indicates a level of complacency that could quickly change. Buying VIX calls for early 2026 could be a cost-effective way to hedge long portfolios against the anticipated repositioning. Create your live VT Markets account and start trading now.

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