Market Pulse: Thursday, December 11, 2025

The Quick Take

After Wednesday’s explosive post-Fed rally, Thursday delivered exactly what healthy markets do: consolidation. The A/D ratio settled to 2.80, down from yesterday’s 3.44 but still firmly bullish with 367 stocks advancing versus 131 declining. The bigger story is what happened underneath: volume conviction faded notably, with advancing stocks capturing just 53.7% of flow compared to Wednesday’s dominant 71.8%. The VIX slipped below 15 to 14.85, entering peak complacency territory. This feels like digestion, not distribution. The market is catching its breath, not reversing course.

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What the Numbers Say

Today’s Breadth: Still Solid

Metric	Value	vs Wednesday	What It Means
Advancers	367	-22	73.1% of stocks gained
Decliners	131	+18	Just 26% falling
A/D Ratio	2.80	-0.64	Strong, healthy pullback
Up Volume Share	53.7%	-18.1pp	Modest volume conviction

Context matters here. A 2.80 A/D ratio would have been celebrated earlier this week. The pullback from 3.44 reflects natural profit-taking after a massive move, not a change in trend. What’s notable is the volume divergence: breadth stayed strong while volume conviction faded. That’s often profit-taking from quick-money traders while longer-term holders maintain positions. Track the pattern on our breadth dashboard →

The Trend: High-Low Ratio Normalizing

Metric	Today	Wednesday	Change
Near 52w highs	51	58	-7
Near 52w lows	4	3	+1
High/Low ratio	12.75:1	19.3:1	Normalizing

The high-low ratio at 12.75:1 remains exceptionally bullish. For every stock near its annual low, nearly 13 are near their highs. The pullback from 19.3:1 simply reflects the market digesting gains rather than any deterioration in underlying strength.

Volatility: Sub-15 VIX

Index	Current IV	Historical Avg	vs Historical
VIX	14.85	~20	-26%, very low
SPY	15.2%	16%	-5%
QQQ	18.6%	24%	-23%
DIA	11.4%	16%	-29%

The VIX dropped below 15, a level we flagged yesterday as peak complacency. SPY implied volatility at 15.2% and DIA at just 11.4% reflect minimal hedging demand. This is what late-stage rally euphoria looks like. Not a warning sign necessarily, but worth noting. Explore current volatility levels →

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Reading Between the Lines

Following Up From Wednesday

Wednesday’s watchlist results:

1. Breadth above 2.0: ✓ A/D ratio at 2.80, well above threshold despite pullback.
2. Volume confirmation: ⚠️ Mixed. Breadth held but volume conviction faded significantly (53.7% vs 71.8%).
3. VIX floor below 15: ✓ VIX hit 14.85, confirming peak complacency.
4. Sector IV normalization: ✓ Most sectors normalized dramatically (detailed below).
5. Treasury market response: Yields stable, Fed’s buying program begins Friday.

Four of five boxes checked. The volume fade is the one yellow flag, but in context of profit-taking after a massive rally, it’s not alarming.

What Thursday’s Action Tells Us

Today’s pattern has a name: healthy consolidation. Here’s the evidence:

1. Breadth held: 73% of stocks still advanced despite the pullback
2. Volume rotated: Quick money took profits, longer-term holders stayed
3. Volatility compressed further: VIX below 15 shows no fear of reversal
4. New highs stable: 51 stocks near 52-week highs, down only 7 from Wednesday’s spike
5. Decliners didn’t surge: Only 131 stocks fell, no broad selling

This is textbook post-breakout behavior. The market surges, digests, then determines whether to continue higher or pull back to retest. So far, the digestion phase looks constructive.

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The Sector View

Sector implied volatility normalized dramatically from Wednesday’s extreme readings:

Sector	Current IV	Historical Avg	vs Historical
XLY (Consumer Disc)	28.0%	20%	+40% 🟡
XLK (Technology)	23.5%	23%	+2% 🟢
XLC (Comm Services)	22.0%	24%	-8% 🟢
XLI (Industrials)	22.0%	19%	+16% 🟡
XLB (Materials)	20.2%	22%	-8% 🟢
XLU (Utilities)	18.9%	17%	+11% 🟢
XLP (Consumer Staples)	17.3%	15%	+15% 🟡
XLV (Healthcare)	22.0%	18%	+22% 🟡

The big story: Wednesday’s extreme sector IV readings collapsed. XLB (Materials) dropped from 65.4% to 20.2%, a massive 45 percentage point contraction. XLC (Communication Services) fell from 51.1% to 22.0%. XLI (Industrials) normalized from 47.3% to 22.0%.

This IV collapse is bullish. It means the hedging demand that spiked those readings has been unwound. Options markets are pricing in stability, not stress.

See all sector performance →

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What This Means for Your Positioning

If You’re Looking to Buy

Thursday’s consolidation offers a better entry than chasing Wednesday’s ramp. The pullback in volume without a pullback in breadth suggests:

• Buyers are patient: No panic selling despite volume fade
• The bid remains: 73% of stocks still advancing
• VIX at 14.85: Low implied volatility means cheaper options for protection

Consider scaling in here rather than waiting for a deeper pullback that may not come.

If You’re Already Long

Your positions just got validated twice: Wednesday’s surge and Thursday’s constructive consolidation. Consider:

• Holding through: This pattern typically resolves higher
• Tightening stops to protect gains, but not so tight that normal volatility shakes you out
• Noting the VIX: Sub-15 means market is complacent, stay alert for any sudden shifts

If You’re on the Sidelines

The consolidation you wanted is happening, just not with a price pullback. The market is digesting through time rather than price. If you’re waiting for lower prices:

• A/D ratio above 2.0 suggests the trend remains intact
• VIX below 15 means options protection is cheap
• Volume fade without breadth fade often precedes continuation higher

Don’t overthink it. The trend is clear.

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What to Watch Friday

1. Volume follow-through: Does buying conviction return, or does the volume fade continue?
2. Breadth stability: Can A/D ratio hold above 2.0? A drop toward 1.5 would be a warning.
3. VIX behavior: Does sub-15 hold, or does any nervousness creep back?
4. Treasury buying begins: Fed’s $40B T-bill purchase program starts Friday, watch for market reaction.
5. Weekly close: How does the market set up heading into the weekend?

The consolidation phase typically lasts 1-3 days. Friday will tell us whether this digestion leads to another leg higher or a more meaningful pullback.

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The Bottom Line

Thursday delivered exactly what the market needed: a pause to digest Wednesday’s Fed-fueled surge. Breadth remained solidly positive at 2.80 A/D ratio, with 367 stocks advancing. But volume conviction faded notably, with advancing stocks capturing just 53.7% of flow, down sharply from Wednesday’s 71.8%.

The VIX dropped below 15 to 14.85, entering peak complacency territory. This isn’t necessarily a warning sign, but it does mean the market has essentially priced out near-term fear. Any surprise could trigger a sharp reaction given how low volatility has gotten.

The real story is sector IV normalization. Wednesday’s extreme readings in Materials, Communication Services, and Industrials collapsed back to normal ranges. XLB dropped 45 percentage points. This IV compression suggests the market has worked through whatever event risk drove those spikes.

New highs remain elevated at 51 stocks, with just 4 near annual lows. The 12.75:1 high-low ratio, while down from Wednesday’s 19.3:1, remains exceptionally bullish. The underlying trend structure is intact.

This is what healthy markets do after explosive moves: they consolidate. Breadth holds while volume fades as quick money exits and longer-term holders maintain positions. The pattern typically resolves with continuation in the prior direction.

December’s rally has now survived a pullback scare early in the week and a Fed decision. With the Fed’s Treasury buying program starting Friday and volatility at rock-bottom levels, the path of least resistance remains higher. But with VIX below 15, stay nimble. Complacency cuts both ways.

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