The S&P
500 broad market barometer is gaining 0.3% to 4735 points. It is close to last
week high at 4741 points, but fell short below weekly resistance at 4730-4750
points. This point to a possibility of a small correction towards the support
at 4650-4670 points before the Christmas rally will hit new all-time highs.
This
correction is strongly advocated by the Federal Reserve’s (Fed) officials. New
York Federal Reserve President John Williams surprised investors by saying that
the Fed isn’t talking about rates cuts at the moment. “I just think it’s just
premature to be even thinking about that,” Williams said. Atlanta Fed
Chief Rafael Bostic echoed him by saying that he sees only two rates cuts “sometime
in the third quarter of 2024. Investors bet that the central bank would cut is
rates more than three times next year with the first cut probably in March.
Chicago Fed’s President Austan Goolsbee followed these two by saying
that the Fed hasn’t won its fight with inflation yet. So, it would be premature
to bet on the interest rates cut before inflation is under control. “Until
we’re convinced that we’re on the path to that [bringing inflation down to the
target], it’s an overstatement to be counting the chickens,” said
Goolsbee. All three are probable those hawkish member of the Fed that plotted one
rater cut in 2024 and voted for leave the rates unchanged in December. So, how
those three appeared almost straight in the row. It is hardly a coincidence.
The hand of an experienced conductor is very well felt. Such statements are
destined to bring send stocks into a small technical correction to lift it to
new all-time highs afterwards. With this in mind, a consolidation below 4730-4750
points is very useful.
Meanwhile
the market will take a pause to lift off at full strength when the important
data will be released in the end of the week. It would be an intriguing
development if the S&P 500 index surpasses the new weekly resistance at
4830-4850 points, reaching a new high above the all-time record at 4819 points
before the end of 2023.
The U.S. Q3
GDP data is scheduled for release this Thursday, with expectations for it to
remain at 5.2% YoY. Additionally, the Fed’s preferred PCE index for November
will be published on Friday, with consensus suggesting 3.4% YoY for the Core
PCE and 2.8% YoY for the headline PCE Index, down from 3.5% and 3.0%,
respectively. Higher PCE numbers may cause concerns, especially considering the
unexpected rise in monthly headline inflation in November, beating consensus.
However, even with higher PCE numbers, the Christmas rally is not likely to be
derailed, though it may be slightly delayed until next week.
A minor
point of interest lies in the Bank of Japan's meeting on Tuesday. The Japanese
central bank is not expected to loudly signal the end of its seven-year-long
negative rates policy, and investors believe this announcement will come but
not in December.
Technically,
the S&P 500 index has passed all over the available upside zone closing at
the resistance at 4730-4750 points. The rally to the next resistance at 4850
points will be available at the end of this week. So, we should not exclude a possible
roll back. More likely, the index will exercise sideways movements.
Oil prices
are seen recovering. Brent crude prices went up above the support at
$74.00-76.00 per barrel. Further upside momentum is needed now to continue
moving towards $84.00-86.00 per barrel. Otherwise, prices may drop below $74.00
per barrel to the support at $65 per barrel.
Gold prices
are moving inside the mid-term upside formation with targets at $2000-2100 per
troy ounce that have already been met. Prices broke through the resistance at
$2100 per ounce to $2141 level and rolled backed to the nearest support is at
$1990-2010 per ounce. Prices may continue to deteriorate pushed down by a
technical weakness period that will last by mid-January potentially leading
gold prices to $1800-1850 per ounce. The fall of prices below $2000 per ounce
will put this scenario into reality.
The
Greenback returned to its primary correction targets at 1.08500-1.09500 against
the Euro. The overbought tension for the EURUSD is removed. So, the EURUSD is
ready to rise towards 1.11500-1.12500.