The stock market is experiencing a significant boost due to the latest inflation report. Unlike previous rallies, this one shows great promise and is expected to continue.
Surge in Major U.S. Stock Indexes
On Tuesday morning, all three major U.S. stock indexes saw impressive gains, with the Nasdaq Composite almost reaching a 2% increase.
Inflation Moderates According to Data
Data reveals that the consumer price index rose by 3.2% year over year in October. Although slightly lower than economists’ expectations, this moderation from September’s 3.7% rise supports the Federal Reserve’s goal of achieving 2% inflation. As a result, it is highly likely that the central bank will maintain steady interest rates rather than implementing further increases to cool the economy. In fact, there is even speculation that the Fed might consider cutting rates within the next year, making stocks even more appealing.
S&P 500 Reaches Key Levels
The S&P 500 index, currently hovering just below 4500, has surpassed important resistance levels, hinting at positive market conditions. Earlier this year, sellers consistently pushed down the index when it approached the “resistance level” around 4400 due to concerns about rising interest rates and their potential impact on the economy. However, Tuesday’s gains suggest that these concerns are diminishing.
The Importance of Holding 4500 Level
While the S&P 500 remains strong below the 4500 mark, it is crucial to observe whether the index can sustain this level or if sellers will once again push it lower. For now, it seems that the S&P 500 is maintaining its position just below 4500.
Potential for Further Gains
The sudden influx of buyers indicates the likelihood of continued gains. If the S&P 500 can remain at its current level for a few days, there is a possibility of momentum carrying it above its previous intraday high of 4607, achieved in July 2023.
According to Frank Cappelleri from Cappthesis, the upside target is around 4675 as long as the SPX (S&P 500) remains above the breakout zone of 4390.
Potential Gain of 5%
If the S&P 500 manages to reach the ambitious target of 4675, it will represent a gain of approximately 5% from its current position.