US equities have recently seen a pullback, but the relationship between the Dow Jones and S&P 500 remains stable. The Dow has declined 1.92% over the last three trading days, slightly less than the S&P 500’s 2.03% drop, indicating a structural difference.<\/p>\n
The Dow Jones maintains its position above the 50-day EMA within its standard deviation band, signalling orderly market behaviour. In contrast, the S&P 500 has exhibited more volatility, relying on EMA support. This disparity suggests a focus on defensive, earnings-stable stocks rather than widespread risk avoidance.<\/p>\n
From early November to December 12, the Dow gained 6.91%, compared to the S&P 500’s 5.85% rise. This outperformance aligns with current market behaviour, as capital moves toward industrials, value, and dividend-linked stocks. This behaviour indicates selective market activity while maintaining a constructive stance.<\/p>\n
A year-end rally can persist without aggressive gains, often characterised by shallow pullbacks, trend support, and a move into safer equities. The Dow leading while the S&P 500 consolidates supports this pattern. As long as the Dow’s structure is intact, the market appears poised for a gradual upward move rather than a decline.<\/p>\n
This scenario reflects a rotation within an ongoing uptrend, suggesting stability rather than stress, a hallmark of late-December equity rallies.<\/p>\n
As of today, December 17, 2025, we are seeing the Dow Jones hold up better than the S&P 500 during recent pullbacks. This suggests money is flowing into more stable, industrial-type companies rather than fleeing the market entirely. This is not a signal to bet on a market crash, but rather to adjust for a rotation in leadership.<\/p>\n
This market behavior is supported by the CBOE Volatility Index (VIX), which is currently trading near a relatively calm level of 16, suggesting a lack of widespread fear among investors. With the November 2025 inflation data showing price pressures continuing to ease, the environment doesn’t favor aggressive bets on a market downturn. The setup supports strategies that benefit from stability or a slow grind higher.<\/p>\n
Historically, the final weeks of December tend to be positive for equities, a phenomenon often called the “Santa Claus Rally.” Looking back, we know this period has delivered positive S&P 500 returns over 75% of the time since the 1950s. This historical tailwind reinforces the idea that positioning for modest upside, rather than a deep correction, is the higher probability trade.<\/p>\n
For derivatives traders, this points toward relative value strategies. One could consider buying call options on the SPDR Dow Jones Industrial Average ETF (DIA) while simultaneously buying puts on a growth-heavy index like the Nasdaq 100 (QQQ). This structure is designed to profit from the observed rotation from tech into value, insulating the trade from the market’s broader direction.<\/p>\n
Given the expectation of orderly movement rather than an explosive rally, selling options premium appears attractive. Selling out-of-the-money put spreads on the Dow or individual industrial stocks could be a way to collect income into the new year. This approach benefits directly from the market’s stability and the steady, grinding uptrend we are currently observing.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Dow leads S&P 500 in stable pullback, signaling rotation toward defensive stocks amid ongoing uptrend.<\/p>\n","protected":false},"author":62,"featured_media":16991,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-37133","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/37133","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=37133"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/37133\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16991"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=37133"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=37133"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=37133"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}