This is a bull market with a 'lower cased b' heading into 2026, says Piper Sandler's Craig Johnson

Key Concepts

• Santa Claus Rally: The tendency for stock prices to rise during the last five trading days of the year and the first two of the new year.
• Bull Market (lowercase 'b'): A moderate, potentially less robust bull market compared to a strong, sustained upward trend (uppercase 'B').
• Measured Objective (in charting): A price target calculated based on previous price movements.
• GDX (VanEck Gold Miners ETF): An exchange-traded fund tracking the performance of gold mining companies.
• XBI (SPDR S&P Biotech ETF): An exchange-traded fund tracking the performance of biotechnology companies.
• Momentum (in technical analysis): The rate of price change; used to identify the strength of a trend.
• Trading Range: A price range within which an asset's price fluctuates.

Market Outlook: SPX and the Santa Claus Rally

Craig Johnson, Chief Market Technician at Piper Sandler, asserts that the bull market remains intact, and the Santa Claus Rally is currently on track. He defines the Santa Claus Rally as encompassing the last five trading days of the year and the first two of the new year. While the market achieved 39 new highs, falling short of a 40th in the current session, Johnson believes there’s still potential for further upside. However, he qualifies this as a “bull market with a lowercase B,” suggesting a more moderate trajectory heading into 2026, rather than a robust, sustained upward trend.

Copper: A Favorable Outlook for 2026

Johnson identifies copper as the most attractive metal currently, citing a “nice upward trending channel” and healthy momentum. He notes the market isn’t overextended and anticipates another 6-7% increase in copper prices, potentially reaching the upper end of its trading range. Copper is designated as Piper Sandler’s “favorite metal for 2026.”

Gold and Silver: Unexpected Strength

Gold and silver have demonstrated “fantastic” performance, contributing significantly to the basic materials sector being the best-performing sector year-to-date. Analyzing the Gold Miners ETF (GDX) chart, Johnson suggests a potential 17% upside to reach a “measured objective.” He finds it unusual, but constructive, that both gold and equity markets are performing well simultaneously, as gold typically acts as a defensive asset.

Dollar Weakness and Central Bank Activity

The positive performance of gold and silver is linked to the weakening of the US dollar, which is on track for its worst year since 2017. Johnson attributes this, in part, to central governments globally choosing to invest in gold and silver instead of US Treasuries.

Biotechnology: A Potential Surprise in 2026

Biotechnology (Biotech) is highlighted as another promising sector, particularly if the Federal Reserve implements rate cuts in 2026. The SPDR S&P Biotech ETF (XBI) has broken out to new highs, indicating potential for further gains. Specific companies within the XBI, such as Exelixis and Regeneron, are also identified as having constructive chart patterns. Johnson predicts that the biotech sector “is probably going to be a surprise for a lot of investors next year.”

Technical Analysis Terminology & Frameworks

Throughout the discussion, Johnson relies heavily on technical analysis. Key terms include:

• New Highs: Reaching price levels not seen previously, indicating bullish momentum.
• Upward Trending Channel: A price pattern where prices consistently move higher within defined parallel lines.
• Momentum: The speed and strength of price movements.
• Measured Objective: A price target derived from previous price swings, used to predict potential future price levels.
• Breakout: When a price moves above a resistance level, signaling a potential continuation of the upward trend.

Logical Connections & Data Points

The conversation flows logically from a broad market overview (SPX and the Santa Claus Rally) to specific sectors and commodities (copper, gold/silver, biotech). The analysis consistently links price movements to underlying economic factors (dollar weakness, central bank activity, potential rate cuts). The 1% weekly gain for the market is used as a starting point, and the discussion builds upon this foundation to explore potential future performance. The mention of the dollar being on pace for its worst year since 2017 provides context for the strength in gold and silver.

Synthesis/Conclusion

Craig Johnson presents a cautiously optimistic outlook for the market. While acknowledging the ongoing bull market and the potential for a Santa Claus Rally, he tempers enthusiasm with the caveat of a “lowercase b” bull market. He identifies copper, gold/silver, and biotechnology as sectors poised for continued growth in 2026, driven by factors such as dollar weakness, central bank demand for precious metals, and potential interest rate cuts. His analysis is firmly rooted in technical analysis, utilizing chart patterns and momentum indicators to support his predictions.