The stock market continues to move with a bullish tone, and the S&P500 offers the best example of a bullish outbreak. Following the US elections and the announcement that a possible vaccine for the COVID-19 is within reach, the stock market’s rotation from tech to value began.
The vaccine news at the start of the previous trading week was much celebrated around the world. Logically, the traditional sectors in the stock market outperformed, as the prospect of a “back to normal” life sooner rather than later triggered optimism.
As a result, the S&P500 broke to a new all-time high. So did the Dow Jones. Also, by breaking higher, the S&P500 index managed to move above a trendline that acted as a dynamic resistance. Following the vaccine news from last Monday, the market retraced and retested the neckline, paving the road for a bounce toward the measured move
All Eyes on the Fed in December
Slowly but surely, the markets’ focus now shifts to the Fed December meeting. The Fed’s balance sheet increased to $7.18 trillion last week, just $2 billion shy of its record high.
The Main Street Program increased by the most since inception, in a sign that the Fed’s measures reach the intended economic sectors. For December, the markets expect more easing from the Fed. The only thing that remains unknown is when the Fed will act – before or at the FOMC meeting? Also, some voices call for as much as a 50% increase in the QE program, a move that will further boost the price of equities.
The chart below speaks of itself – the market broke higher and now retests previous resistance turned support. As such, bulls may want to stay long with a stop at 3,450 and targeting the measured move at the pattern close to the $4,000 level.