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SP500 posts new record highs as Santa Claus rally holds strong

The bull market is never ending.

The SP500 index continued to climb higher, posting fresh all-time highs this week and trading above 4,800 USD today.

Many analysts and investments bank remain bullish on equities, despite rising US yields and monetary policy tightening in the US.

Strategists at UBS continue to see upside for equities. Energy and financials are set to outperform. While volatility is expected, they believe a still-accommodative policy backdrop, along with solid economic and corporate fundamentals, should support further upside for equities. Still, they favor the likely winners from global growth, including energy and financials, balanced with exposure to more defensive sectors like healthcare.

At the same time, economists at Credit Suisse look for the S&P 500 Index to move to 4970/5000, potentially as far as 5200. They would not rule an overshoot towards 5200 (10% higher), but our bias at present is similarly not for a move beyond here.”

On the other hand, the SP500 index hasn’t touched its 200-day moving average since July 2022. That is one and a half years above the 200-day average, an unusual statistical anomaly.

US data failed to move the markets

From other news, the Richmond Fed Manufacturing index improved slightly in December, printing 16, up from 12 in November. Additionally, the housing price index for October rose to 1.1% monthly, up from 0.9% previously. Finally, the SP/Case Shiller home price indices eased slightly to 18.4% year-on-year, down from 19.1% in September.

Liquidity will likely stay low throughout the rest of the week as most market participants are usually out of offices during this period.

Elsewhere, Goldman Sachs expects the Fed to start the lift-off in March. The Fed will likely deliver two more rate hikes after that in 2022. Nevertheless, US indices remain strong.

Technically speaking, the trend still seems bullish. The short-term support is in the 4,740 – 4,700 USD zone, while the medium-term demand zone is near December lows of 4,500 USD. The 200-day average is currently below 4,400 USD (9% below the actual price).

It looks like the index will indeed reach the magical level of 5,000 USD pretty soon.

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