FX.co ★ Weekly review of US stock market, November 9

S&P500

Weekly review of US stock market for November 3 - 9

The US stock market is booming and has reached year highs, that is all-time highs. As of November 9, the US S&P500 index has gained from 3750 to 4700 points or +25%. It is a very impressive result for the US market, matching multi-year highs. On the one hand, it indicates a high level of optimism on the market at the moment and a strong state of the US economy. However, it is also a warning signal for investors as it is completely unreasonable to start strategic buying at current price levels. It is better to buy only at the nearest strong market rebound, i.e. at correction.

Last week, the US stock market finally got information about the Fed's decision to start tapering its economic growth support program. The Fed's support will be decreasing from the current $120 billion a month at a rate of $15 billion a month with the end of the program by mid-summer 2022. Besides, the Fed tried to soften the policy reversal as much as possible as there was no announcement of a possible Fed rate hike, despite the fact that the US inflation rate has been above 3.6% per year for several months. However, the Fed inflation target is at 2.5%. Moreover, the market also obtained results of the October jobs report. It is a positive report, new jobs increased by 530,000 and the unemployment rate dropped 0.2% to 4.6%

Weekly gain:

The Dow Jones is 36050 - 36430, rising by 380 pips or 1%

The NASDAQ Composite is 15670 - 15980, advancing by 310 pips or 2%.

The S&P500 is 4610 - 4700, adding 90 pips or 2%

Outlook:

The approximate range for the Dow Jones is 36300 - 36500

The approximate range for the NASDAQ is 15700 - 16100

The approximate range for the S&P500 is 4600 - 4750

Conclusion

Looking ahead, the Fed policy tightening, i.e. rate hikes to fight inflation is inevitable. Besides, a slowdown in the US economy is also unavoidable. Consequently, a big correction in the stock market is likely. It is only a matter of time and those levels that the market can reach before the fall. Moreover, it is possible to note that US market overheating is already observed. Besides, a strong drop in stock prices may become an independent risk and negative factor for the economy.