The equity market picked up some momentum in recent sessions, thanks to twin data showing a letup in inflationary pressure. The rally is here to stay, at least for the near term, according to CNBC’s Jim Cramer.
What Happened: The current market rally is likely to last at least through mid-December, the stock picker said, citing chart analysis from OptionsPlay’s Jessica Inskip.
“Things could change as we get closer to the next Fed meeting a month from today, but in the meantime, there’s a lot to like about this market,” Cramer said.
Referring to the S&P 500 chart, the CNBC host said there was “bullish divergence in late September and early October, suggesting that the two key momentum indicators – the relative strength index and the moving average convergence/divergence line, gained strength at that time.”
Their upturn, Cramer said, predicted the recent rally.
On Tuesday, the S&P 500 broke through a key Fibonacci level, where a stock could pivot or encounter resistance, he said, citing Inskip’s technical analysis. The next stop could be the 200-day moving average, which the S&P 500 Index wasn’t able to breach when it peaked in August, he said.
“Maybe this time will be different now that inflation finally seems to be going in the right direction.”
Benzinga’s Take: Wednesday’s trading will be challenged by negative tidings from Target Corp. TGT and geopolitical tensions triggered by an alleged missile attack on Poland by Russia could serve as a drag.
The data dependency of the Fed makes it difficult to predict market trajectory with certainty.
The markets get to digest the November non-farm payrolls report in early December and the November consumer price inflation report on Dec. 13. The second estimate of third-quarter GDP is due on Nov. 30. More importantly, the Federal Open Market Committee – the policy-setting arm of the Fed, will announce its next interest rate decision on Dec. 15.
A rally may not be a given due to the numerous variables going into the economic outlook and monetary policy.
The SPDR S&P 500 ETF Trust SPY was edging down 0.58% to $396.26 on Wednesday morning, according to Benzinga Pro data.
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Read More: Jim Cramer Sees Rally Lasting At Least Through Mid-December: ‘There’s A Lot To Like About