Key Insights for Today’s U.S. Trading Session

As 2023 draws to a close, investors may be tempted to stay on the sidelines, considering recent market volatility and the high expectations tied to the elusive Santa Rally. However, the outlook appears optimistic for the upcoming Tuesday trading session in this shortened week. Following the release of significant inflation data, the focus shifts to a few key indicators such as U.S. housing data and weekly jobless benefit claims.

The predominant theme in recent weeks has been the anticipation of Federal Reserve interest rate cuts in the coming year, with projections of up to seven cuts in 2024. However, cautionary voices suggest that such optimism might be overly ambitious.

Despite the potential imbalance in expectations, short-term market momentum seems likely to persist as investors enthusiastically embrace the prevailing euphoria, according to insights from The Kobeissi Letter’s Adam Kobeissi.

Kobeissi notes that the S&P 500 has shown a clear indifference to overbought technical indicators, exhibiting a consistent upward trajectory in price action. The strategist cites ongoing optimism surrounding geopolitical stability and the significant decline in oil and commodity prices as factors supporting equities into the New Year. Notably, crude oil prices have decreased by over 8% in 2023.

While Kobeissi acknowledges that concerns about inflation persist, he emphasizes that the near-term momentum in the stock market is driven by investor expectations of the awaited shift in Fed policy.

Examining the technical landscape, Kobeissi points out that the S&P 500 briefly surpassed 4,770 on December 20 before experiencing a rapid 80-point drop. As of the latest data, the index is only 0.8% away from its recent record close of 4,796.56 on January 3, 2022. Analyzing indicators such as the daily RSI and Bollinger Bands, Kobeissi suggests that while some overbought conditions exist, the momentum signals are still strong.

Looking ahead, Kobeissi anticipates a move into new all-time high territory for the S&P 500, projecting a breakthrough above the previous record of 4,818. He expresses bullish sentiment with a target of 4,820 and a stop-loss at 4,690, predicting a potential move above 4,780 as early as this week.

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