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  • Weekly Summary: PCE Index is the Last Piece of the Puzzle for Stocks to Rally in 2023

Weekly Summary: PCE Index is the Last Piece of the Puzzle for Stocks to Rally in 2023

The S&P 500 broad market index is rising by 0.5% to 4745 points this week. The benchmark is very close to post a new all-time high above 4819 points. The index has climbed to 4782 points on 20th December but rolled back by 1.5% to 4694 points. This drop indicated that the U.S. stock market was not ready for a rally and has to rest until next week within the resistance zone of 4740-4760 points.

In return, the raid for the all-time high may start next Tuesday after the S&P 500 would climb above 4760 points. This will unlock the targets at 4850-4950 points. Investors are getting ready for this despite a general market overbought tension. This tension would play its role after new highs would be reached, close to mid-January. This could become the moment for an S&P 500 index reversal. So far, the Federal Reserve (Fed) U-turn in its monetary policy is pushing stocks up.

According to the CME FedWatch Tool, bets for three interest rate cuts next year increased. The bets for the first cut in March from 5.50% to 5.25% rose from 62.70% to 71.30%. Bets on May's cuts to 5.00% increased to 70.20. Chances for the third cut in June to 4.75% improved to 64.10%. These are significant changes given the unexpected deterioration in the U.S. Q3 GDP. The final data pinpointed a growth of 4.9% QoQ compared to the expected 5.2% QoQ. The cooling should reduce the likelihood of a Fed rate cut, but investors are not reacting.

Technically, the S&P 500 index is close to the new all-time highs territory. The benchmark is consolidating inside the resistance zone of 4740-4760 points. The next resistance moved to 4850 points. A surpass of the 4760 points will make this record available.

Oil prices are recovering. Brent crude prices went up above the support at $74.00-76.00 per barrel close to the $80.00 per barrel mark. The nearest upside targets are at $84.00-85.00 per barrel. In case of a downside scenario, 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 $2010-2030 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 $2010 per ounce will put this scenario into reality.

The Greenback edged lower beyond its primary correction targets at 1.08500-1.09500 against the Euro. The Dollar is moving now to the next target at 1.11500-1.12500. The speed of this correction will depend on the closing of Friday and Monday. If the pair closes above 1.10000 it may rise rapidly. Otherwise, this correction may take some more time to mid-January.