Technical Analyst, Saxo Bank
S&P500 bounced off its short term rising trendline just before Christmas starting the Santa Claus rally lifting the Index to new All-Time highs. We could see a couple of days with minor correction possibly down to around 4.700. However, RSI in bullish sentiment without divergence support short term bullish outlook.
S&P 500 is still trading in its medium term steep rising channel as can be seen on the weekly chart. Lower rising trendline was tested mid-December until buyers came in lifting the market cancelling out the top and reversal pattern formed in November that could have signaled a larger downturn.
However, RSI divergence is still something to keep an eye on. The strength indicator is not supporting the new highs and the Santa rally took place under quite low volume. However, divergence i.e. an imbalance in the market can go on for quite some time. (see RSI Divergence explained at the end of the article)
Strong support at around 4.495.
Nasdaq 100 bounced off its support at around 15.638 (seems like 15.543 was the key level) but didn’t manage to perform a new All-Time high.
Despite RSI divergence it is not out the question we could see new highs. If RSI breaks above its falling trendline. However, with the low and falling volume during the Santa rally the bounce is not build on solid ground. We need to see volume coming in.
However, on the weekly chart the picture is almost similar to S&P 500. Index is still trading above its medium term rising trendline. However, there are some weaknesses. The Bearish Engulfing top and reversal candle is not cancelled out, divergence on RSI and MACD. Staying above 15.543 is crucial.
Same can be observed in bear market just here market makes a new low but Indicator doesn’t.
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.