The S&P 500 futures rose by 1.4% to 6014
points this week, signaling the onset of the Santa rally. However, concerns
linger as the index already neared its typical rally span, touching 6045 points
(+1.2%). Large investor activity exacerbates uncertainty, with SPDR S&P 500
ETF Trust (SPY) witnessing extreme net outflows of $21.7 billion, a level last
seen in February 2020 when the S&P 500 subsequently dropped 34% in four
weeks. Contrastingly, SPY also recorded $19.6 billion in inflows this week,
highlighting volatile market positioning. If the S&P 500 approaches the
critical 5800-point mark, caution is warranted, and long positions should be
reconsidered.
Macroeconomic data provided mixed signals.
U.S. consumer confidence slipped to its lowest since September, and jobless
claims data was inconclusive—initial claims declined, but continuing claims
rose to 1.91 million, the highest since November 2021. The debt market showed
signs of strain, with 10-year yields rising to 4.57% and briefly touching
4.61%, adding potential pressure on equity markets.
Next week’s activity
is expected to be subdued due to New Year celebrations, resuming Thursday with
PMI data releases from the Eurozone, the U.K.,
and the U.S. Should be interesting to see the numbers.
From a technical
perspective, the S&P 500’s outlook has changed. The index surpassed initial
targets at 5700-5800 points and hit the targets at 6050-6150, retreating to the
downside. Now the benchmark has returned to the upside trajectory restoring
targets at 6050-6150 points. The benchmark has to hold above the resistance at
6150 points to climb further. Extreme
targets are located at 6550-6650 points.
In commodities, Brent
crude prices are hovering at $73.40 per barrel. The nearest resistance is at
$78.00-80.00, with support at $69.00-71.00. The Organization of Petroleum
Exporting Countries and its allies know as OPEC+ delayed production increase
until April 2025, as expected. Chances for a decline below the support towards
$59.00-62.00 per barrel have risen since then.
Gold prices are at
$2,627 per troy ounce this week. The nearest resistance is at $2,670-2,690,
while the support is at $2570-2590 per ounce. The upside scenario for gold
prices remains a priority scenario.
In the currency
market, the EURUSD is swinging around 1.04100. A break above 1.05700 is
required to confirm an upside scenario targeting 1.09500-1.10500. Downside risk appears limited barring extraordinary developments.