| By Harry Boxer, Technical Market Analyst
U.S. Indexes Rise on Rate-Cut Optimism
U.S. stock indexes finished the holiday-shortened week higher, boosted by dovish comments from some Federal Reserve officials and several weaker-than-expected economic reports that seemed to reinforce the idea that a December rate cut remains on track.
Small-cap stocks outperformed their large-cap peers, as the Russell 2000 Index advanced 5.52% for the week and is ahead 7.5% for the year. The technology-heavy Nasdaq Composite also posted strong returns, rebounding from the prior week’s sell-off as concerns regarding elevated valuations and spending on artificial intelligence (AI) appeared to take a back seat to optimism around the growth potential from the technology. It is now +16.5% YTD.
The S&P 500 is now on track for a third consecutive year of double-digit returns, up about 13.5%. And that is despite a near bear-market correction in April, and the recent 5% pullback/retracement. Traders who stayed the course through volatility were rewarded.
International equities have fared even better, with the MSCI All Country World Index (ex-U.S.) up 23%, driven by a weaker U.S. dollar and an improving global growth outlook.
Seasonal Trends Support Further Gains Into Year-End
After a brief wobble in early November, equity markets regained momentum, with the S&P 500 finishing the month with a slight gain. Seasonal trends appear to point to a strong year-end finish: historically, the post-Thanksgiving period has delivered solid returns. Over the past 30 years, December has averaged a gain of about 1%, with markets rising roughly 70% of the time.
Crypto & Volatility: Bitcoin Still Weak, VIX Rises Again
A week after falling into bear market territory, the price of Bitcoin, the most widely traded cryptocurrency, fell further, sinking to the lowest level in seven months. Bitcoin was trading around $85,000 on Friday afternoon, down from its record price of about $126,000 reached in early October. The pullback low was near $80,000 before a late-week rebound.
Volatility increased. A gauge that tracks investors’ short-term expectations of U.S. stock market volatility surged, accelerating a rise that began the previous week. The Cboe Volatility Index climbed as high as 28 in trading on Thursday before pulling back to close around 23 on Friday. The figure was up from the prior week’s closing VIX level of just below 20.
Key Technical Levels to Watch
Short-term technical levels to watch going forward are chart resistance at SPX 6870 and 6920. Support appears near 6770 and 6725. Support beneath those levels is near 6630 and MAJOR support at 6522.
In any case, as we always do at thetechtrader.com, we’ll “Trade What We See, Not What We Think.”
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