Weekly Focus: Santa Rally on Almost No Data

Christmas has finally arrived, bringing closures for most leading exchanges, with trades set to resume on Tuesday. While Europeans continue their celebrations, U.S. investors may aim to kickstart the Santa rally.

The PCE index last Friday aligned with consensus, with Core PCE at 1.9%, below the Federal Reserve's (Fed) target of 2.0%. This led investors to increase bets on interest rate cuts in March to 78.1% from 75.6%, according to the CME FedWatch Tool. Bets on further interest rate cuts in May and June also saw an uptick.

Investors' optimism was evident in significant capital inflows into SPDR S&P 500 ETF Trust (SPY), reporting a $39 billion weekly inflow, the highest since 2014. However, this influx was not met with a substantial rise in stocks, as the S&P 500 broad market index added a modest 0.5%. A Santa rally, which formally starts five days before the New Year (this year, on Tuesday) and lasts until January 2-3, may be anticipated. The index could potentially surge by another 2.0-3.0% during this rally, targeting 4850-4950 points. However, a steady climb above the resistance at 4740-4760 points is a prerequisite, with the index closing last week near the 4750 points mark.

This week's economic calendar lacks market-moving news. Notable data, including Initial Jobless Claims and Trade Balance in the United States, scheduled for the second half of the week, could serve as a formal reason for the anticipated rally.

Technically, the S&P 500 index entered a territory of new all-time highs. 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 these records 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. Technically, the upside period for  the oil prices is closing in December. 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 was set to the maximum. So, the pair may hit these targets already this week.