With the year coming to a close, I want to share what I believe is the most important chart to consider as we head into 2025.

When it comes to the most critical stocks, it's all about tech. This has been the case for at least the last decade and a half.

Mega-cap tech not only dominates U.S. indexes, but these stocks also play a major role in most investors' portfolios.

The same is true for semiconductors, which serve as both a benchmark for the technology sector and a barometer for the broader market. They are also the posterchild of the ongoing AI revolution.

By evaluating relative trends, we gain insight into leadership and can also assess the market's overall health.

Take a look at the long-term view of Technology $XLK and Semiconductors $SOX relative to the S&P 500 $SPX.

Higher highs and higher lows are what make an uptrend. When that stops being the case, it's time to reassess.

Let's step back and take a look at the Dow Jones Industrial Average. The diverse mega-cap index makes a great benchmark for the broader market.

Right now, the Dow is sitting at a critical Fibonacci extension level, around 42,000. That also lines up with the July highs, adding more weight to this key area.

As the year comes to a close, the relative strength in space and exploration stocks is absolutely off the charts.

Steve did a great job covering them last month—make sure to check it out if you haven't already.

These stocks have been on my watchlist for weeks, and I think their time has come to continue their upward path.

Let me walk you through my two top picks that are offering an astronomical risk versus reward opportunity at current levels.

First up, we have Rocket Lab $RKLB:

If you've been paying attention this year, you've likely heard about failed tops. They've been everywhere, teasing traders with bearish setups that never materialize. 

Here's how it usually plays out. When support breaks, short-sellers rush to pile on, driving prices lower. But then, the market pulls a fast one. Prices creep back above those broken supports, squeezing shorts and forcing them to cover. Meanwhile, the longs panic, rushing to re-enter.

The latest chatter has been about a potential head-and-shoulders top in Nvidia $NVDA. But let's be real—the bulls are taking back control, and this setup is looking more and more like another false alarm.

Here are three key levels I’m watching in the coming days:

With downside volatility picking up this week, some of you might be wondering if we are on the cusp of a significant market downturn, or is this just another dip that buyers will eventually step into?

It’s worth remembering that every big move starts small, but not every small move turns into something bigger. 

That’s where credit spreads come into play—they act as a reliable barometer of market health, offering insights into investor sentiment and risk appetite.

One effective way to measure them is by analyzing the ratio of the High-Yield Bond ETF $HYG to the Treasury Bond ETF $IEI.

When investors are willing to take on more risk, this ratio typically trends higher. On the other hand, when caution takes over and safety becomes the priority, credit spreads widen, and this ratio declines.

While most uptrends have come under pressure in December, the rally in US Dollars has remained strong.

The US Dollar Index $DXY has been climbing in a near-vertical line since it bottomed at the lower bounds of its range three months ago.

Today, DXY is attempting to break out of a base as it trades at its highest level in over two years.

Today was a bloodbath for stocks. 

Bears showed up after the FOMC announcement, and the market got sold aggressively with every sector finishing lower on the day.

The S&P 500 plunged 2.95%, its worst drop in over two years. Small-caps, banks, and industrials have now given back all of their post-election gains, joining a growing list of groups to do this.

And the VIX spiked sharply, recording its second-largest single-day move in history.

On days like today, analysts are checking under the hood and assessing market internals to see how significant the damage is.

Here’s one of my go-to charts for this. It shows the percentage of S&P 500 stocks at 1-, 3-, 6-, and 12-month lows:

From time to time, I like to play devil's advocate as part of an exercise to identify potential wrenches and better understand the market environment we might be heading into.

One "cheat code" I've picked up over the years is to assess Consumer Staples stocks on a relative basis.

As the ultimate defensive sector, Staples are the safe-haven that investors hide out in when the broader market comes under pressure.

So far this cycle, we haven't seen investors run to these stocks for safety. That said, the ratio is at a critical juncture as we speak.

The chart below highlights Consumer Staples $XLP relative to the S&P 500 $SPY, currently at a major support level marked by the dot-com bubble lows.

Today, while chatting with Sam, we discussed our bullish outlook on Tesla and its potential for more disruptive innovation in the future.

It’s incredible how things once seen as science fiction or “only in the movies,” are becoming reality. 

Elon Musk resembles a real-world Tony Stark or a Star Wars visionary, turning far-out ideas into groundbreaking new technologies.

But this isn’t about Musk or our fundamental outlook on the company — the chart setup couldn’t look any better.

The risk for TSLA is skewed heavily to the upside above those old highs.

The Dow Jones Internet Index Fund $FDN has been on a tear, stair-steeping higher in a nearly vertical line for the past three months.

Price is knocking at the door to new all-time highs as it challenges its prior cycle peak from 2021.

However, whether or not this breakout sticks is a big question here.

The lower pane shows that the price is extended from its 200-day moving average.

Even though the S&P 500 has experienced a series of negative days, no increase in new lows suggests breadth isn't significantly weakening.

One of the weakest sectors post-election has been the SPDR Materials ETF $XLB, which marked its ninth straight down day today.

The last time we saw such a streak of consecutive losses was during the middle of the previous bear market in 2022. 

With large-cap tech gaining momentum, semiconductors have set the stage for a year-end rally.

The Equal-Weight Semiconductors ETF $XSD offers a valuable lens into the overall health and performance of this critically important subsector.