Weekly Stock Market Update & SPY Technical Analysis
Last week, the markets edged to new all-time highs, but both volume and buying momentum showed signs of slowing as traders and investors await the Federal Reserve's final interest rate decision of the year. The FOMC meeting on Wednesday will determine whether the Fed continues its path of interest rate cuts or holds steady. Earlier this month, further rate cuts seemed like a straightforward decision, but recent economic data has complicated the picture. Reports of rising inflation suggest that this year’s rate cuts may have already begun to push inflation in the wrong direction. At the same time, the U.S. unemployment rate has been creeping upward, adding another layer of complexity.
The Fed now faces a difficult balancing act: another rate cut could help stimulate job growth but risks further exacerbating inflation. This delicate situation is unfolding against the backdrop of stock markets trading near record highs. Any unexpected moves from the Fed could trigger profit-taking, which has the potential to spiral into broader panic selling.
Given these dynamics, traders and investors should approach this week with caution. The immediate impact of this week’s events might not be fully reflected in the markets right away, as investors digest Wednesday’s FOMC decision and subsequent economic reports. One key release to watch is Friday’s PCE report, which will provide an updated look at November’s inflation rate. Like last week’s CPI data, the PCE report—The Fed’s preferred inflation measure—is expected to show an annual rise from 2.3% to 2.5%, moving further away from the 2% target. If confirmed, this would mark the third inflation report this month indicating upward pressure on prices, further complicating the Fed’s decision-making process.
SPY Technical Analysis:
Over the past seven trading sessions, SPY has been range-bound as capital rotates within the market. Major tech names like Nvidia have pulled back while others, including Apple, Meta, and Tesla, have seen inflows, reflecting a healthy redistribution of capital within a bull market. This rotational activity has kept SPY trading sideways as gains in some stocks offset losses in others.
However, prolonged periods of tight range-bound trading often precede significant moves. Whether SPY breaks out to the upside or downside will likely hinge on this week’s pivotal economic reports and the Fed's decision. Traders should be prepared for heightened volatility as the market digests these key developments.