Stock futures rose early on Thursday as investors remained in buoyant mood after the Federal Reserve surprised by indicating its cycle of interest rate hikes was over and it was minded to cut rates by 75 basis points in 2024.
“This unexpected shift resonated harmoniously with investors as the ‘rallying cry ‘ was heard from every corner of global financial markets, ” SPI Asset Management said.
Indeed, the nascent Thursday session saw continued investor optimism, with 10-year Treasury yields dipping further to 3.95% and stock-index futures extending their rally.
However, there are signs that traders may be overly confident and the rally is overextended in the short term, some analysts observed.
The CBOE VIX index was trading just below 12, its lowest in about four years. And the S&P 500’s 14-day relative strength index, a momentum gauge, closed Wednesday’s session at 78.2, according to Dow Jones data, well above the overbought threshold of 70.
“Technically the snapback in multiple sectors in the last month is certainly a positive heading into 2024. Unfortunately, U.S. equities show RSI readings at elevated levels and the risk/reward scenario certainly hasn’t improved after a [roughly] 13% rally in the last seven weeks,” Fundstrat said.