- The S&P 500 exhibited a modest retreat during Monday's trading session, a move that could be signaling an imminent major breakout on the horizon.
- The pivotal 4600 level has emerged as a focal point commanding the attention of many market participants. It seems almost inevitable that we will eventually breach this level. Just beneath, the 4500 level serves as robust support, while the 4540 level also plays a significant role.
- The S&P 500, in typical fashion, is likely to witness attempts to usher in the "Santa Claus rally" as the year-end approaches, a period when traders strive to compensate for any lackluster performance over the year.
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Maintaining levels above the crucial 4500 mark appears to be the key to unleashing the S&P 500's further potential. Nevertheless, the past week or two have been dedicated to shedding excess profits, a necessary market adjustment. This suggests that an element of caution should be exercised while simultaneously searching for valuable opportunities along the way. All things considered; the prevailing sentiment continues to favor a "buying on the dip" approach.
A Potential Breakdown?
In the event of a breakdown from the current levels, a market reset in January seems plausible, with traders eagerly seizing any opportunities presented by a dip. I find it challenging to chase performance at this juncture, given the market's relentless bullishness. Chasing such a fervent rally carries substantial risk, despite the potential for a breakout in the next week or so. Furthermore, this year's "Santa Claus rally" could present unique challenges due to the central banks scheduled to announce interest rate decisions this week. The market's trajectory may heavily depend on the statements from Jerome Powell, which are expected on Wednesday.
In essence, the S&P 500 is poised on the precipice of significant developments, marked by the potential for a game-changing breakout. Proceeding with cautious optimism while monitoring the central bank announcements remains prudent in navigating this market. After all, this is a market that has run far up in the air over the last few weeks. The market continues to look for reasons to go higher, and the week could see a lot of noisy behavior out there. The idea that the “Santa Claus rally” is coming is something that we need to see as likely, but at the same time, we have to look at the idea of central banks causing significant damage.
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