A brand new all-time excessive awaits the S&P 500 as traders ‘purchase into the euphoria,’ says this strategist

What has marked the previous few weeks of buying and selling are these excessive hopes using on Federal Reserve interest-rate cuts subsequent 12 months, with a complete of seven seen in 2024 although some warn that could be a little too optimistic.

No matter how lopsided these expectations could also be, “near-term market momentum is likely to persist as investors buy into the euphoria,” says our name of the day from The Kobeissi Letter’s Adam Kobeissi.

“The S&P 500’s clear disregard for overbought technical indicators and the straight-line higher type of price action reinforces this view,” he tells purchasers in a Dec. 25 e-newsletter.

“Also supporting equities into the New Year are sustained hopes that geopolitical tensions are contained and oil prices, as well as prices of other commodities, have come down significantly which should continue to support the Fed’s fight against inflation,” mentioned Kobessi. Crude-oil costs, for one are down over 8% up to now for 2023.

And the strategist mentioned whereas they don’t assume there’s an all clear on inflation but, near-term momentum for shares will “persist solely on the basis of investors anticipating the long-awaited Fed pivot.”

Looking on the technical image, he notes the S&P 500 index briefly pushed above 4,770 on Dec. 20 earlier than dropping almost 80 factors in only a few hours. On Friday, the index closed 0.8% from its most up-to-date report shut of 4,796.56 hit Jan. 3, 2022.

The identical occurred on Dec. 22, when the index crossed again above 4,770, he mentioned, including that since then, the day by day RSI (relative power index, a momentum indicator) has fallen from round 83 to round 71, “which still marks overbought conditions,” mentioned Kobessi.

He additionally notes that the day by day backside Bollinger Band — additionally an overbought/oversold indicator — has flattened at 4,484, whereas the day by day high Bollinger Band has shifted greater, having ended the week at 4,799. When a safety’s worth strikes above the higher Bollinger Band it may be seen as overbought, whereas shifting under that signifies oversold.

A continued transfer greater within the high Bollinger Band is a “strong signal” that momentum is shifting greater and the Dec. 20 low of 4,697 was a “brief near-term higher low,” he mentioned.

“Looking ahead, we believe that the S&P 500 is poised for a move into new all-time high territory, breaking above the 4818 previous all time high,
setting up for a continued rally into early-January. Therefore, we are now bullish on the S&P 500 with a 4,820 target and 4,690 stop-loss and look for a move above 4,780 as soon as this week,” he mentioned.

The markets

U.S. shares
DJIA

SPX

COMP
are creeping greater, with Treasury yields
BX:TMUBMUSD10Y
regular. Gold
GC00,
+0.18%
can be up, with oil costs
CL.1,
+2.87%
getting a modest raise.

The buzz

Data confirmed S&P Case-Shiller 20-city residence worth index hitting an all-time excessive in October. The remainder of the week will see weekly jobless claims and new residence gross sales delivered.

Manchester United
MANU,
+3.33%
shares are up 10% after British billionaire Jim Ratcliffe mentioned he’ll purchase a minority stake within the U.Okay. soccer membership.

Shares of U.S.-listed Gracell Technologies
GRCL,
+59.94%
are up 58% after the Shanghai-based biopharmaceutical group mentioned AstraZeneca
AZN,
-0.42%
AZN,
+0.12%
will purchase it in a deal value as much as $1.2 billion.

Bristol Myers
BMY,
+0.03%
is shopping for radiopharmaceutical group RayzeBio
RYZB,
+101.64%
at a greater than 100% premium in a $4.1 billion deal.

NIO inventory
NIO,
+7.92%
is up over 3% after the Chinese electric-vehicle maker unveiled its govt four-seat sedan with a beginning worth of $112,780.

Tesla
TSLA,
+0.52%
disclosed a recall of 120,423 Model S and X automobiles, over door-safety points.

U.S.-listed shares of China’s Hollysys Automation Technologies
HOLI,
+6.23%
are up 5% after a consortium led by Dazheng Group Acquisition supplied $1.8 billion in money to purchase the automation management system options supplier, topping a bid from non-public funding agency Ascendent Capital Partners.

China voiced assist for the web gaming business and mentioned 105 new video games had been accredited, after final week’s proposed curbs final week sparked heavy losses for NetEase
NTES,
+5.49%,
Huya
HUYA,
+3.40%
and Tencent Holdings’
700,
-12.35%.

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