S&P 500 and Nasdaq faced challenges as buyers couldn’t keep momentum above the 6,850 mark. This situation created shorting opportunities, prompting traders to be cautious. With limited data on the last full week of the year, it’s wise to balance books and avoid impulsive trades. We did see a slight uptick before the closing bell, a pattern often seen before Wednesday market shifts. Gold is holding steady below $4,350 as US Treasury bond yields rise, with expectations for small weekly gains as markets enter holiday mode. The EUR/USD pair has bounced back above 1.1730, boosted by a strong Wall Street open, putting pressure on the US Dollar. GBP/USD is stabilizing just below 1.3400, reflecting the Bank of England’s recent minor rate cut in a context of improving market sentiment.

Cryptocurrency Movements

Bitcoin has risen above $88,000, even amid a bearish market, with Ethereum and XRP also seeing gains. XRP is targeting a breakout past $2.00, as ETFs report strong inflows, signaling institutional interest. While November’s inflation data may not change Federal Reserve policies, it does influence market expectations amid cooling prices. The S&P 500 has failed to close above the 6,850 level three times this week, indicating that buying pressure is fading. With institutional players wrapping up the year, average daily trading volumes have decreased by 15% compared to November. This suggests that any potential upward moves will struggle to overcome significant resistance. As we move into the holiday-shortened weeks, thinner markets could lead to sharp price changes with little news. The Volatility Index (VIX) is currently around 14, a level typically seen before short-term spikes in volatility, especially during late December’s low trading volumes. This opens up opportunities for strategies that benefit from sudden market swings, like buying puts on major indices.

Year-End Trading Opportunities

Many traders are looking for a “Santa Claus Rally,” which historically averages a 1.3% gain for the S&P 500 in late December and early January. However, given current resistance levels and the pullback from institutional investors, we think any rally will be limited. It might be wise to bet against a significant year-end increase by using credit spreads or selling call options on overextended tech stocks. Overall, there’s a noticeable shift toward safety in the market, leading to a cautious approach. Gold’s steady performance around $4,350 an ounce shows that investors are seeking protection against market volatility. At the same time, Bitcoin’s difficulty holding the $88,000 mark, despite ETF inflows, reveals that even riskier assets are feeling pressure. Create your live VT Markets account and start trading now.

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