The S&P 500 saw a drop just before trading began, with retail investors closely watching the PCE and UoM data. Prices bounced back to nearly where they were before the dip. This week, the stock market showed strength, even after a sell-off in Bitcoin at the start. Crypto had a tough day on Friday, yet the Nasdaq performed better. There was a noticeable difference in how major stocks performed, with NVDA and GOOGL standing out as top performers for the year. There are still doubts about whether the market can maintain a Santa Claus rally, especially with possible hawkish signals from Powell. Upcoming earnings reports from companies like ORCL and AVGO also play a role in shaping market trends. On Friday, economic data fell short of expectations, but the market absorbed it well without much impact on the index. Retailers showed mixed results, with signs pointing to better activity in services compared to manufacturing, raising concerns about a recession. Rising yields in Japan didn’t sway the Nikkei or global stocks. This information is not investment advice. Always conduct thorough research and be aware of risks, including the possibility of total loss. The opinions expressed do not represent the views of FXStreet or its advertisers. The S&P 500 is demonstrating strong resilience, creating higher lows even after a shaky start to the week. Friday’s Core PCE inflation data showed an increase of 2.8%, which was better than the feared 3.0%. This sparked a buy-the-dip mindset, indicating investors can tolerate news that isn’t overly negative, which is a positive sign for now. With the Federal Reserve meeting next week, a 25-basis point rate cut is widely expected, marking the first since the significant rate hikes of 2022-2023. The VIX index remains low at around 14, making call options on indices like SPX and NDX a smart way to prepare for a potential year-end rally. However, this low VIX means any unexpected hawkish comments from the Fed could lead to a sharp increase, suggesting that protective puts might be wise. The Magnificent Seven stocks are now moving independently, so we need to be more careful with single-stock options. Currently, about 55% of S&P 500 companies are above their 50-day moving average, indicating that the market’s advance isn’t strong across all sectors. It’s better to focus on derivatives strategies involving leading stocks like NVDA or essential sectors like banking instead of betting on broad market ETFs. Looking ahead, traders are eager for a classic Santa Claus rally. Historically, this is a strong time for stocks, with the S&P 500 rising about 77% of the time during the last week of December and the first two trading days of January. Given this seasonal boost, using short-dated weekly call options could effectively capture a quick, sentiment-driven price increase.

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