By ForexTime
US equity bulls remain in the driver’s seat with the SPX500_m bagging its sixth week of gains after the strong US jobs data boosted hopes around the US economy avoiding a recession. The stock Index has also drawn strength from growing bets over the Federal Reserve cutting interest rates next year amid slowing inflation.
Taking a brief peek at the technicals, prices are trending higher on the daily charts. Despite the recent breakout above 4600, it may be worth keeping an eye on the range with support found at 4545.
The next few days could be wild for the SPX500_m and here are 3 reasons why:
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It’s a big week for the US economy thanks to top-tier economic reports including the highly anticipated US CPI report on Tuesday.
This crucial inflation report along with the latest retail sales and industrial production among others could influence bets around what the Fed will do beyond 2023. As highlighted in our week ahead report, headline inflation is expected to have cooled further due to falling energy prices, while the annual core inflation to remain unchanged.
Given how the S&P 500 Index has a handful of tech stocks that remain sensitive to interest rate expectations, the incoming US inflation figures have the ability to rock the index.
Markets widely expect the Federal Reserve to leave rates unchanged on Wednesday, so the focus falls on the updated economic projections and dot plots for fresh clarity on its next move.
Note: Looking beyond US data and the Fed decision, it may be worth keeping an eye on the “Triple witching”.
US markets may see a sudden jump in volumes on Friday as Futures and Options contracts on Stocks and Indices expire in what is called “Triple witching”. This happens once a quarter and has the potential to cause some market volatility.
Regarding the technical picture, prices are firmly bullish on the daily charts. There have been consistently higher highs and higher lows while prices are trading above the 50, 100 and 200-day SMA. However, the Relative Strength Index (RSI) remains around 70 suggesting that prices are heavily overbought. A technical throwback could be on the table before the index pushes higher.
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