S&P 500 (SPX) still wants to go higher and Producer Price Index data is the perfect excuse

S&P 500 contineu sto trade higehr after weak PPI.
Walmart (WMT) also boosts sentiment as it rallies strongly.
Crowded trade of 2022, long US Dollar, short tech is being unwound.

Ivan Brian FXStreet

Equities are continuing to push higher and this move may now manage to extend itself into year-end. Seasonality is on our side post-Midterm Elections and so we will enter the traditional Santa Claus rally, with the S&P 500 index targeting the 4,000 level.

S&P 500 (SPX) news

Last week the market got all excited when the US Consumer Price Index (CPI) print came in tamer than expected. We got a massive rally in risk and the US Dollar unwound spectacularly. Today the argument is being reinforced by the Producer Price Index (PPI) also showing signs that inflation may have peaked. Again we see a strong reaction in yield-sensitive assets with the Nasdaq futures ahead by nearly 3%.

Walmart (WMT stock) already primed this rally earlier with strong earnings and outlook and it surged 8% in the premarket. So it seems we have become overly stretched with too much negativity and now that is being aggressively unwound. The Euro is rising as gas storage and mild temperatures are helping sentiment and outlook. US Treasury yield plays are also moving as the US Dollar unwinds.

S&P 500 (SPX) forecast

The S&P 500 index is moving aggressively toward 4,000. As Tier 1 points out this is a big option level on Friday. As ever moves always tend to overstretch so I would not be surprised to see the 200-day moving average at 4,078 tested. This rally is now long in the tooth but the sense among participants is that we are at a turning point in the fight against inflation. Rightly or wrongly this may be used as an excuse to push this rally beyond previous ones. Above 3,900 I expect this rally to continue. A break of 4,100 should then see 4,300 tested relatively quickly. Below 3,859 and bears will return aggressively.

SPX daily

Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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