The major stock indices were bearish during most of 2022 as central banks kept raising rates at the fastest pace on record. But, they made a bullish reversal in October as central banks started giving some dovish comments on a slowing global economy. Indices made some decent gains until the middle of December when several major central banks delivered the latest rate hike. 

The FED slowed to 50 bps (basis points) but left further tightening to the mercy of the economic data. This month the economic data has been mostly soft, which has forced the USD to resume the downtrend and risk sentiment to improve, which has been keeping risk assets such as stock markets bullish. So, this year indices have been bullish after the retreat in December.

S&P 500 H4 Chart – The 200 SMA Holding As Support

SPX bouncing off the 200 SMA as soon as stochastic became oversold 

Last week we saw some negative numbers from the US, such as Empire State Manufacturing Index which dived into negative territory, while Retail Sales posted a decent decline for December. But, the decline was attributed to the extremely cold weather around Boxing Day, so fears of a deep recession eased and after the retreat, on Thursday the bullish momentum started to pick up again.

On Friday there were several FED members speaking on the economy, inflation, and rate hikes, so traders were waiting to hear from them. They didn’t sound too worried about inflation or the economy, so markets took it positively and ended the week on a bullish foot. So, we’re expecting stock markets to remain mostly bullish throughout this year as inflation slows and the global economy starts to recover toward Q2 or Q3.

Friday’s Close for Main Stock Indices

• Dow Industrial Average up by 364 points or 1.47% at 33322.71 points
• S&P is up by 78.24 points or 2.24 percent at 3963.01 points
• NASDAQ index is up by 310.41 points or 2.96% at 11596.32 points