The last days have been favorable for US stocks – indices have been rising for six days in a row, and the SP&500 index is now almost 7% higher than the last week’s lows. This is indeed a very strong movement towards a positive aspect.
Stock prices rose on Wednesday after Fed Chairman Jerome Powell changed his position on the neutral level, saying that the current rates are slightly below the estimates.
This tone is very different from the previous one, when he assumed that the neutral level is still far away. His words imply that the Fed could pause with the rate hikes in 2019 or stop them completely, as the rates, which are higher than neutral ones, can be seen as limiting an economy that seems to be slowing down.
In addition, stocks soared around the world on Monday after Trump and Xi Jinping managed to calm the markets. A truce has been established in a trade conflict for 90 days. On Saturday, the White House said that Trump agreed to keep the tariffs on American goods at the same level after January 1, since China is ready to increase imports from the United States. However, if a new trade deal is not concluded within the next 90 days, tariffs can raise to 25%, as previously promised. Stock markets took this news very positively. These two fundamental events sent a strong bullish signal to investors about a possible start of the Santa Claus rally in the stock market, since December is usually a positive month for US stocks.
Technically, the SP&500 index is now testing the main resistance around 2.815, where two peaks are located along with a 100-day moving average. The RSI indicator suggests overbought, therefore some correction is possible. Key support is at 2.760, where the 200-day moving average is located. It can be concluded that the bull trend has been back on track and, if the price abruptly exceeds 2.815, the Santa Claus rally will continue, focusing on the 2.900 level.