Weekly Focus: Santa Rally Is On

Just a few days left before the New Year, but the Santa rally is wrapping markets. The S&P 500 broad market index delivered 2.0% from last Thursday when the rally was flagged, breaking all-time highs twice.

The rise of futures’ prices for S&P 500 paused at around 4800 points which was close to the average historical Santa rally performance for the last 92 years at 2.6%. But investors may bet on more with such a rapid climb of the index. Technically, with a recent breakthrough it may target 4900-5000 points by the middle of next week.

So, Santa’s generosity may be more extreme than usual since other business Titans are supporting the rally. Mastercard Inc recently reported that U.S. retail sales during this year’s holiday shopping season from November 1 to December 24 rose 8.5%. It beat investors’ expectations for a possible slowdown in the U.S. economy due to the spread of the Omicron variant. Any more good news like this and the index would likely hit the 4900-5000 target by the middle of next week without any doubts. On Monday the S&P 500 index climbed above 4780 points and paved the way to the next target at 4850 points.

Oil has suddenly broken through and head towards the aggressive upside targets of $81.50-82.00 per barrel for the Brent crude benchmark. It is important that Brent crude prices hold above $78.30 per barrel. If crude prices make another upside step we may expect a rally here too.

Gold prices edged higher to $1815 per troy ounce while keeping their sideways direction. Prices are still in a downward pattern towards $1550-1650 per ounce but they may perform an upside swing towards $1830-1850 by the end of February 2022 if prices remain above $1750 by January 15. Nevertheless, basic scenarios suggest that gold prices would decline towards indicated targets after this short upside swing.

EURUSD has missed upside opportunities as it failed to reach the 1.13900-1.14000 level. The pair is trading around 1.13200, just above the 1.13000 support level and it is close to the resistance level of 1.13900. Opening any trades at current levels might be risky, but the overall technical picture suggests the pair is likely to slide to 1.12000 by the end of January 2022.

GBPUSD is in a much more interesting position as it is thought to still be targeting 1.3600.1.3700 by the middle of next week. The pair is trading above the support level at 1.34200, so any buy positions would be worth considering.