Has the market corrected sufficiently and are we successfully steering clear from a looming recession?

The S&P500 has experienced the quickest recovery ever in 2023 after a correction, climbing around 9.5% in the weeks since, right from the support level I, mentioned in my previous post. This movement has created a stir in the market and has everyone wondering.

1. SPX: A Sneak Peak:
   • Strong third-quarterly results from tech corporations, a phasedown in the Middle Eastern Conflict with Israel advancing into Gaza along with a fall in US bond #yields have contributed to SPX’s big epic rally last week.
   • However, this rally can be a Year-End rally, fueled by bears covering their short-term positions and bulls buying in panic.
   • Although I, acknowledge the fact that the corporate sector isn’t similar to the entire American economy, they do share a close relationship. Actions on any side can influence each other though not simultaneously.
   • Surprisingly, the strong Q3 results came in during the same period when the American economy was also performing well. However, corporates continue to face the risk of higher interest rates with its effects visible in the first two quarters of 2024.
   • Another significant development that has worked as a bonus for #SPX is the decline in oil prices. It has helped the economy progress on the path of disinflation along with improved numbers in the CPI report. While the CPI numbers are 3.2% down from the previous month’s 3.7%, it will still be over FED’s 2% target.
   • The slowdown in #CPI numbers could impact corporate earnings and sales estimates. The retail sales data of 2023 has marked the lowest figures confirming this concern. With lower retail sales and rising unemployment rates, there may be possibility of a further decline in interest rates and a potential anticipation of rate cuts.
   • Now that the fear of #inflation has reduced, we need to focus on unemployment numbers as any increase in these numbers can pose a challenge. Initial jobless numbers have started increasing from the lower level of 191k to 231k, which are still not considered alarming.
2. My views on SPX: A Roadmap

   At present, the market looks promising guided by the notion that lower inflation could result in interest rate cuts. With SPX breaching the 4400-resistance level, it may face resistance at 4600, but chances are it can reach 4800, an all-time high.

   • If it crosses the 4800 level, it may signal the onset of a new bull market, a process likely to take time. A strong market direction will be confirmed only by next year.
   • I believe that SPX may or may not reach its all-time high, but it is most likely to witness a tough time in 2024.
   • Also, if the #FED hikes #interest rates again, it may pave the way for another market decline, filling the lower gaps created during its quickest comeback.

SPX's journey is dynamic with new twists and turns. Stay informed with me to witness the developments in the coming weeks