Week Ahead: SPX500_m poised for a ‘Santa Rally’?
<p><strong>By <a href="http://investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a> </strong></p>
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<ul>
<li>S&P 500 gains 8.9% in November</li>
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<li>December historically good month for stocks</li>
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<ul>
<li>Keep eye on US jobs report and ‘Santa Rally’ chatter</li>
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<ul>
<li>Prices trending higher but RSI signals overbought</li>
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<ul>
<li>Can SPX500_m bulls maintain hunger for gains?</li>
</ul>
<h3><strong>Christmas may have come early for investors after the S&P 500 ended November 8.9% higher!</strong></h3>
<p>This was not only its biggest monthly gain since <strong>July 2022</strong> but also its <strong>fourth-best month in 10 years.</strong></p>
<p>As we enter December, the stock index could see heightened volatility thanks to key US economic data and growing chatter about a<strong> ‘Santa Claus Rally’.</strong></p>
<p><strong>Monday, 4th December</strong></p>
<ul>
<li>USD: US factory orders, durable goods</li>
</ul>
<p><strong>Tuesday, 5th December</strong></p>
<ul>
<li>CNH: China Caixin services PMI</li>
<li>AUD: Reserve Bank of Australia rate decision</li>
<li>EUR: Eurozone S&P Global Services PMI, PPI</li>
<li>JPY: Japan Tokyo CPI</li>
<li>USD: US ISM Services, Job openings</li>
</ul>
<p><strong>Wednesday, 6th December </strong></p>
<ul>
<li>AUD: Australia GDP</li>
<li>CAD: Bank of Canada rate decision</li>
<li>EUR: Eurozone retail sales, Germany factory orders</li>
<li>GBP: Bank of England biannual stability report</li>
<li>USD: US trade</li>
</ul>
<p><strong>Thursday, 7th December </strong></p>
<ul>
<li>CNH: China trade, forex reserves</li>
<li>AUD: Australia trade balance</li>
<li>EUR: Eurozone GDP, Germany industrial production</li>
<li>USD: US initial jobless claims</li>
</ul>
<p><strong>Friday, 8th December </strong></p>
<ul>
<li>JPY: Japan household spending, GDP</li>
<li>EUR: Germany CPI</li>
<li><strong>USD: US jobs report</strong>, University of Michigan consumer sentiment</li>
</ul>
<p>US equity bulls remain supported by <strong>cooling inflation, positive US economic data, and growing speculation around the Fed cutting interest rates in 2024.</strong> This is reflected in the SPX500_m which has created consistently higher highs and higher lows on the daily timeframe.</p>
<p><img fetchpriority="high" decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/SPX500_mDaily2_1.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="de1f2724-3a35-489d-b274-f986fc4780f4" data-src="/s3-static/users/user17/SPX500_mDaily2_1.png" /></p>
<p><em>Note: SPX500_m tracks the S&P 500 index (the benchmark used to measure the stock performance of the 500 largest listed US companies)</em></p>
<p>With exactly one month left until the end of 2023, the question is whether SPX500_m bulls can maintain their hunger for gains.</p>
<p><strong>Here are 3 factors to keep an eye on in the week ahead:</strong></p>
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<h3><strong>‘Santa Rally’ chatter </strong></h3>
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<p>With Christmas just around the corner, discussion around a potential ‘Santa Clause Rally’ is likely to be widely discussed across the board.</p>
<h3><strong>This financial phenomenon is where stocks generally rise in the last week of December and the first two trading days of the new year. </strong></h3>
<p>It is not fully clear whether it’s <strong>purely psychological</strong> or triggered by some <strong>underlying financial forces</strong>, but history has shown that this is a recurring seasonal pattern.</p>
<h3><strong>Indeed, December has been a historically positive month for the S&P500 which has produced positive returns 75% of the time since 1994.</strong></h3>
<p>Markets seem to be in good spirits with chatter about a ‘Santa Rally’ possibly influencing the index over the next few weeks.</p>
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<h3><strong>US November jobs report </strong></h3>
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<p>On the data front, the <strong>US non-farm payrolls</strong> could offer fresh clues about what action the Federal Reserve will take beyond 2023.</p>
<p>The US economy is expected to have created <strong>200,000 jobs in November</strong>, a noticeable pickup from the <strong>150,000 jobs in October</strong>. The unemployment rate is forecast to remain unchanged at <strong>3.9%</strong> while average hourly earnings are expected to tick lower to <strong>4.0% year-on-year.</strong></p>
<h3><strong>Given how tech stocks account for roughly 29% of the S&P 500 weighting, the incoming jobs report could spark volatility.</strong></h3>
<p><em>Note: Tech stocks influenced by interest rates because their value is based on earnings forecasted in the future.</em></p>
<p><strong>Traders are currently pricing in a 60% probability of a 25-basis point cut by March 2024, with a cut by May 2024 fully priced, according to Fed Funds futures.</strong></p>
<ul>
<li><strong>The SPX500_m is likely to trade lower</strong> if the US jobs report meets or exceeds forecasts and investors re-evaluate when the Fed will cut rates in 2024.</li>
<li>Should the US jobs report market expectations, this could reinforce bets around the Fed cutting rates – <strong>supporting the SPX500_m as a result.</strong></li>
</ul>
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<h3><strong>Technical forces</strong></h3>
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<p>The SPX500_m remains in a bullish channel on the daily charts with prices trading above the 50, 100, and 200-day SMA. Although the path of least resistance points north, <strong>the Relative Strength Index (RSI) remains around 70</strong> – suggesting that prices are heavily overbought. A technical rebound could be a possibility before bulls return to the driving seat.</p>
<ul>
<li><strong>The support at 4525</strong> could provide bulls the foundation to attack <strong>the 2023 high at 4611</strong> <strong>and 46</strong>60 – a level not seen since January 2022.</li>
<li><strong>Should prices slip back under 4525</strong>, this may open a path back towards 4500 and 4470, respectively.</li>
</ul>
<p><img decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/SPX500_mDaily_25.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="faa8bbe7-a270-4275-b129-bda8b8c3f60f" data-src="/s3-static/users/user17/SPX500_mDaily_25.png" /></p>
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<p><img decoding="async" class="size-full wp-image-54242 alignleft" src="https://www.investmacro.com/articles-analysis/wp-content/uploads/2014/07/Forex-Time-Logo.png" alt="Forex-Time-Logo" width="262" height="90" /><strong>Article by <span><a href="https://www.investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a></span></strong></p>
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