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28.12.2022 01:53 PM
U.S. Stock Market Analysis on 27th December and 23rd December Post Market Review

U.S. markets are closed on Monday in observance of Christmas Day, which falls on Sunday. U.S. indices were up on Friday, while the inflation data released on Friday is being accessed as the market diverges in outlook vs the Fed. The Dow Jones was up 0.53% to 33,203.93, the S&P500 rose 0.59% to 3,844.82, and the NASDAQ was up 0.21% to 10,497.86. At the same time, oil prices jumped.

Notable News

  • China to scrap Covid quarantine rule for inbound travelers from Jan 8
  • US Core PCE Price Index +0.2% M/M, matching estimates; Consumer spending stagnated at +0.1% M/M - weakest since Jul-22 and below 0.2% forecast
  • Uni of Michigan Consumer Sentiment Index rose to 59.7, up from Oct's 56.8, helped by easing inflation pressures
  • US new home sales unexpected rose for second month
  • BOJ's Kuroda dismisses near-term chance of exiting easy policy

What To Watch This Week

  • Japan - Unemployment, Retail Sales (Tuesday), Industrial Production (Wednesday)
  • China - Industrial Profits (Tuesday), Manufacturing PMI (Saturday)
  • US - Goods Trade Balance, Retail Inventories (27th), Pending Home Sales (Wednesday), Initial Jobless Claims (Thursday)
  • UK - Nationwide Housing Pries (Friday)
  • At home, PPI (Thursday), Money Supply (Friday) are due

Long-term view on market and 2023 outlook:

In general, investors are still concerned about the market outlook and the fears are increasing. The economic recession seems inevitable, as major monetary authorities are determined to continue to battle high inflation. In my view, monetary policy will turn accommodative as inflation trends down. Growth pressures still weigh on developed markets' equity in 1Q 2023, but a turn in monetary policy will provide liquidity support to asset prices. Consensus expects interest rates to peak around 5.0% in the middle of 2023, which indicates it is closer to the end of the hiking cycle. I remain cautious on U.S. equities into 1Q 2023, and I believe the market will be more positive as markets bottom out in 2Q 2023.

27th December trading analysis

S&P 500 daily chart:

This image is no longer relevant

The S&P 500 index finished higher in a turbulent pre-holiday session Friday, as an inflation report and a slew of other data did nothing to change views that the Federal Reserve would likely keep raising interest rates even if the economy slowed. From the daily chart, the price is hovering between $3,784 support level and $3,947 resistance level. It is crucial to continue to watch the price movement in these few days to see whether the bull traders will successfully break through the $3,947 resistance level and push it to the next support level at around $4,072, or the bear traders will pull the price to the $3,784 support line and continue fall to the $3,662 support line. Traders may find an opportunity to trade between $3,784 and $3,947 as the index already traded in this range for a few days. Nonetheless, given the Fed would likely continue to raise the interest rate and the index is still trading below its 10MA and 50MA lines, I suggest traders remain cautious.

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