Major Market Moves to Trade in Q1

BY BILL GRIFFO

January 5, 2026

Hey Income Hunters,

If you’ve felt like markets are doing that “everything, everywhere, all at once” routine… you’re not imagining it.

Stocks are once again near all-time highs

Gold is acting like a coiled spring that is ready to pop, and

The bond market is quietly setting up what could become the real headline of 2026: a fight between the Fed (short rates) and the market (long rates).

Let’s take a look at the four major indexes using current macro and technical signals so you are prepared for key trends in Q1 ‘23

1) U.S. 10-Year Treasury: The Bull Flag That Can Spook Everything

Where it is now: ~4.19% (Jan 2).

Macro backdrop:

The bottom line with bonds is that foreign and marginal buyers will step back unless they’re paid high yields—even while the Fed cuts. That’s the nightmare scenario because it breaks the comforting story that “rate cuts = lower yields = higher stocks.”
Remember: the Fed controls the short end. The 10–30 year is market-controlled. If the market decides the U.S. needs to pay up, yields rise anyway.
And yes, Japan matters: higher Japanese yields can unwind carry trades and pull dollars out of the US, tightening U.S. liquidity at the worst time. (That “rising tide lifts all boats” line about global yields is key here.)

Technical tells:

The chart below illustrates a 10-year trend that looks like a bull flag—a pattern that often resolves higher. Higher yields can pressure valuations and make “risk-free-ish” returns competitive with stocks.

Portfolio implication: Put Options on Bond ETFs (TLT) are very cheap, due to low volatility so consider buying 1-year portfolio protection and look to reallocate with 10-year yields above 4.5%.

2) S&P 500 (SPX): Near Highs, But the Chart is Flashing “Careful”

Where it is now: about 6,858.

Macro backdrop:

The transcript makes the uncomfortable point: a lot of “strong GDP” may be AI capex, while the everyday economy feels softer (inflation fatigue, labor cooling). If the Fed cuts because growth is weakening (not because inflation is conquered), stocks can sell off on the cut.
Add the bond-market risk above, and you get the setup for the call: a 20% drawdown at some point in 2026, likely in the first half.

Technical tells:

The S&P is in a rising parallel channel from the 2020 lows, and it’s near the upper rail—with new all-time high behavior that will most likely follow.
Base-case… new highs until we see a sell-off, retest and failure pattern, which would signal a ~12% back to prior highs… but if long yields surge, the drawdown can be bigger.

Portfolio implication: Don’t confuse “still going up” with “safe.” In bubble markets, timing is hard—but risk management is not.

3) Physical Gold: The Insurance Policy That’s Acting Like an Investment

Where it is now: spot around $4,376/oz (Jan 2 update).

Macro backdrop:

Gold’s message is loud: faith in paper promises is softening. Central bank buying, policy credibility concerns, and the risk of higher inflation all support the bid.
2025 has been an enormous year for gold gains, driven by rate cuts, central bank buying, ETF inflows, and geopolitical stress. We expect 2026 to offer more of the same.

Technical tells:

Gold has broken out above prior highs with key support at $4,250.
Upside target from the parallel channel: $5,000 in the first half of 2026 (possibly earlier if momentum persists).
“Worst-case buy zone” if panic liquidation hits: $3,500 (a fast washout, then rebound—COVID-style).

Portfolio implication (and why physical matters):

Physical gold prevents the “click-to-sell” temptation. In 2026, that might be the difference between owning insurance and trading it.

What I’d Consider Rebalancing Now (Simple, Long-Term Friendly)

Trim duration risk: favor front-end T-bills / short duration over long bonds. (And consider tactical hedges while volatility is still reasonable.)
Keep real asset ballast: physical gold first, then selective commodities exposure.
Equity posture: keep quality, but reduce “priced for perfection” exposure (AI-adjacent froth), and consider protection if we get another new high breakout that fails.
Watch the Fed chessboard: leadership optics can move the long end faster than most investors expect.

The market’s big tell right now is this: if long yields rise while the Fed is trying to ease, the old playbook breaks. That’s when portfolios built for “normal times” need to be managed appropriately. Not a time to sleep at the wheel.

We wish everyone a healthy and prosperous 2026!

Live and Trade With Passion My Friends,

Bill Griffo