Memo to MomentumX Investors:

The market is currently pulling back meaningfully, with the S&P 500 closing at 6721 on December 17 - down over 1% in its fourth straight losing session. The index has retreated from its mid-December highs near 6900, struggling to hold altitude in what felt like "thin air".

Everyone sees the headline decline, yet second-level thinking reveals we remain firmly in Range Warfare - the phase we have described in our last two updates. The consensus flips between "Risk On" exuberance and "Risk Off" fear, but this probe lower is the market's way of testing liquidity, filling magnetic gaps, and building the compression needed for a more sustainable leg higher.

Range Warfare: The Evolution of Our Thesis

As noted in our last update, the recovery to ~6850 decisively invalidated our "Final Washout to 6400" thesis. With recent price action breaking prior supports, our critical floor has evolved lower to ~6700, re-opening the possibility of a retest toward 6400–6600. We are no longer digging trenches; we are navigating the grind as the market builds a base before its next major move, likely by early January.

The reality of Range Warfare was cemented by a "Near Miss" Zweig Breadth Thrust in late November—forcing hedged funds into panic-buying to prevent lower lows, but lacking the breadth for a true bull run. The market is caught in a tug-of-war between momentum chasing and the gravity of high valuations (~24x earnings) and AI repricing risk.

The Rotation Mechanism: AI Repricing

We are witnessing a structural repricing of the AI narrative. While the public remains fixated on silicon, "smart money" is rotating into tangible assets and commodities—the hard foundation of the real economy.

This is a multi-wave process of energy compression. This probe aligns with our quant signals: lower gaps acting as magnets to build liquidity and develop an ideal trendline post-OpEx. We anticipate any deeper test toward 6400–6600 as high-asymmetry base-building—providing even stronger energy for a leg toward 7300—though the real test lies in 2026, where we project a broader market correction of 15–25% as the narrative finally breaks.

Technical Architecture: Three Decision Tiers

• 6900+ (The Trap): View moves above this level with extreme caution; it remains a bull trap unless participation broadens significantly.
• ~6700 (The Floor): Our current critical line of defense. As long as weekly support holds here, consolidation remains constructive.
• <6700 (The Warning): A decisive break signals the "Near Miss" rally has failed. We see 6400–6600 as a potential double bottom and high-asymmetry opportunity.

2025 Performance Recap: Connecting the Dots to Today

• April: Entered at the bottom, overweighting ETH (via 2x leveraged ETHT) and select plays in Rare Earths and PGMs.
• October: Called the crypto top and moved to "Risk Off" by mid-month, anticipating the 6–10% pullback. Reduced generational low positions—specifically ALB, SQM, and ARKG—to 2–3% exposure.
• In the past 3-4 weeks:
  • Identified a range/base for BTC and ETH, anticipating a rally to $110k for BTC and $4.5k–$5.5k for ETH, with a 25% tail-risk probability of a BTC run to the $138k–$150k area.
  • SPX Outlook: Forming the base that will take us higher to 7300 in Q1/Q2 2026—as part of a distribution rally and AI repricing/rotation—followed by a more pronounced correction.

Strategic Directives: The "Insulation" Trade

Our goal is clarity over activity. We are buyers of our "Generational Low" plays—metals, shipping, gas, and cannabis—on dips toward the 6400–6600 zone.

The Plan:

1. Reload on Generational Lows: As the SPX tests the 6400–6600 zone, deploy capital into high-conviction rotations.
2. Ride the Q1 Rally: Position to capture the move toward 7300 on the SPX through Q1 2026.
3. De-Risk Protocol: Prepare to pivot toward a conservative posture as we hit 7300 to insulate against the 2026 volatility wall.

Crypto Majors ($BTC, $ETH): The "Last Dance"

Core thesis holds: this remains a bounce to the $103k–$110k zone.

• Core Cycle Thesis, Last Dance Playing Out:
  1. Ongoing chop/consolidation in $80k–$93k zone (current BTC ~$86k–$88k holding base; ~10% risk of wick to ~$76k).
  2. Expected "exit liquidity" rally to $103k–$110k cycle top.
  3. Transition to structural bear market, with bottom projected in summer / or latest Oct. 2026
  4. Invalidation: volume surge >150% breakout yields blue-sky $138k–$150k; 25% chance.
• BTC Dominance & Conditions: BTC.D elevated at ~58–59%, reflecting relative strength amid broad weakness. Institutional ETF flows favor BTC, muting retail rotations.
• BTC Price Action: Building a solid base; patience required. If $83k holds, bottom may be in—with higher movement in early January.
• Altcoin Positioning: ETH push to $4.5k–$5.5k likely triggers final 200–500% echo rally in spot-dominant alts (buy selectively). Low Altcoin Season Index (~18–20) confirms BTC season—no broad rotation yet.

A comprehensive "Market State of Play" deep dive will follow later this month. Most investors see decline and feel fear; we recognize that the boring work of base-building - often mistaken for weakness - is where lasting edges are forged.
Stay disciplined.

Action: Follow KINETIC FLOW, our crypto video update coming Sat/Sun Dec 21/22. Mandate: Catch the "Last Dance" and lock in generational lows before the crowd returns.