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The financial markets closed on a positive note on Monday, extending the previous week’s robust rally, primarily driven by widespread anticipation of imminent interest-rate cuts. Technology stocks spearheaded the surge, marking a significant upturn in investor sentiment. As the week unfolds, market participants are keenly observing the last data releases of the year, eager to gauge their impact on the prospects of rate cuts.
Against the backdrop of mounting expectations for interest-rate cuts, Treasury yields have maintained proximity to recent lows. Investors are closely monitoring these indicators as they seek clues about the potential direction of monetary policy.
While European stocks experienced mixed performance, with some decline in major indices, oil shares bucked the trend. Crude prices surged on the back of mounting concerns about possible supply disruptions stemming from attacks on ships in the Red Sea.
In a positive development, confidence among U.S. home builders rebounded in December. This recovery follows a period during which mortgage rates appeared to have peaked. A report from the National Association for Home Builders on Monday highlighted this improved sentiment.
Last week proved to be another robust period for the market, with the S&P 500 now boasting a 23% gain for the year. Monday echoed this positive sentiment, as the market exuded confidence in the economy’s growth potential, especially with the Federal Reserve contemplating a shift towards interest-rate cuts.
Apple faced a slight setback, experiencing a 0.9% decline as the tech giant announced a temporary halt in Apple Watch sales to comply with a U.S. import ban. Adobe, on the other hand, rose 2.5% after terminating its $20 billion deal to acquire design tools maker Figma. Uber Technologies made its S&P 500 debut, causing a slight dip in its shares. Jabil and Builders FirstSource also joined the index, with both experiencing minor declines on Monday.
The market consensus leans towards the belief that the Federal Reserve has concluded its rate-hiking cycle for this year and the next. The prevailing sentiment anticipates a high probability of interest-rate cuts in the first half of 2024, signaling a bullish outlook for the market. High BETA risk-on asset classes continue to outperform, with the dollar and longer-dated treasuries exhibiting weakening trends.
Looking ahead, many market participants expect the Fed to start lowering interest rates in the first half of 2024, providing a catalyst for continued market momentum. However, caution prevails as any deviation from this scenario, such as prolonged inflation, could delay rate cuts until the second half of 2025. Market evaluations currently do not factor in this possibility.
Despite the ongoing rally, some analysts caution that the S&P 500’s ascent may be capped at the $470-480 level, with short-term support identified in the range of 400-430. While patterns of higher highs and higher lows are anticipated in the coming weeks, there is a consensus that the peak of this rally may already be in the rearview mirror. For reference, the SPY Seasonal Chart is shown below:
To sustain the upward trajectory, the market needs a catalyst. While short-term pullbacks are expected, the pattern of higher highs and higher lows is projected to persist into the next year. As long as the majority of investors remain optimistic about the absence of recession signs, the market is likely to grind higher. However, uncertainties persist, and vigilance remains crucial as global economic dynamics evolve.
Using the “SPY” symbol to analyze the S&P 500 our 10-day prediction window shows a near-term positive outlook. Prediction data is uploaded after the market closes at 6 p.m. CST. Today’s data is based on market signals from the previous trading session.
Note: The Vector column calculates the change of the Forecasted Average Price for the next trading session relative to the average of actual prices for the last trading session. The column shows the expected average price movement “Up or Down”, in percent. Trend traders should trade along the predicted direction of the Vector. The higher the value of the Vector the higher its momentum.
*Please note: At the time of publication Vlad Karpel does NOT have a position in the featured symbol, slv. Our featured symbol is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, or MonthlyTrader recommendations. If you are interested in receiving Vlad’s picks, please click here.
West Texas Intermediate for Crude Oil delivery (CL.1) is priced at $72.56 per barrel, up 1.58%, at the time of publication.
Looking at USO, a crude oil tracker, our 10-day prediction model shows mixed signals. The fund is trading at $67.15 at the time of publication. Prediction data is uploaded after the market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
The price for the Gold Continuous Contract (GC00) is up 0.27% at $2041.20 at the time of publication.
Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows mixed signals. The gold proxy is trading at $187 at the time of publication. Vector signals show -0.56% for today. Prediction data is uploaded after the market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
The yield on the 10-year Treasury note is up at 3.939% at the time of publication.
The yield on the 30-year Treasury note is up at 4.048% at the time of publication.
Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see mixed signals in our 10-day prediction window. Prediction data is uploaded after the market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
The CBOE Volatility Index (^VIX) is priced at $12.56 up 0.02% at the time of publication, and our 10-day prediction window shows mixed signals. Prediction data is uploaded after the market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
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