US Indexes Outlook: Santa Rally finally showing up? – Sentiment improves after US CPI miss

[Ben Graham]

US Equities are closing the week on a better note as the CPI report triggers pricing for further rate cuts in 2026.

The roles seem to have reversed compared to last week's Fed Speaker communications. NY Fed President Williams pointed towards a further pause this morning, suggesting the CPI data may have been affected by "distortions," while Goolsbee seemed positively surprised by the inflation figures.

But another, more fundamental theme could be lifting stocks:

Traders are pricing in the Bank of Japan hitting the brakes on future hikes. After an 11-month pause, the BoJ just hiked rates to 0.75%, the highest level in 30 years.

While markets have been concerned that BoJ tightening would diminish carry trade opportunities as rate differentials converge, the central bank's lack of hawkish guidance suggests rates will stay put for a while.

This supports prospects for further carry trade-sponsored stock purchases—right on time for a Santa Rally.

zoom_out_map

Morning US Data releases – MarketPulse Economic Calendar

Consumer sentiment also just missed again, by a small margin.

The real concern is for the Inflation expectations which are ticking up on the short-term – The next report should be interesting.

Major volatility could show up ahead as traders get ready for contract expirations of Options and Futures on Indexes, known as Quadruple Witching.

Keep that in mind in case you see major movements towards the session and weekly close.

Let's dive into our daily outlook and technical levels for the major US Indexes: Dow Jones, Nasdaq, and S&P 500.

Read More:

• WTI Outlook: Oil Bounces From Channel Lows — Major Reversal in 2026?
• Yen weakness despite higher interest rates
• Nikkei 225: A gradual interest rate hike stance by BoJ maintains the bullish trend

Semiconductors and Tech lead the Market Higher

zoom_out_map

Current picture for the Stock Market (11:21 A.M. ET) – Source: TradingView – December 19, 2025

The session is not as widely green as yesterday, but still quite positive. Consumer related sectors (Defensive Equities) are lagging.

zoom_out_map

Per Sector Stock performance – December 11, 2025. Source: TradingView

A strong bounce in Tech!

Dow Jones 1H Chart – slow rebound

zoom_out_map

Dow Jones (CFD) 1H Chart – December 19, 2025 – Source: TradingView

The outlook for the Dow is far from negative but questions remain if the recent action is one of a range or a double-bottom.

To get a better answer, look at whether buyers manage to break above the 48,460 November Highs.

Failing to do so would point to a 48,000 to 48,500 range.

Dow Jones technical levels of interest:

Resistance Levels

• All-time High resistance between 48,700 to 48,886
• Session highs 48,350
• November ATH 48,500, acting as resistance possible range highs)
• 50,000 Psychological Level and Potential Fib Target (50,159)

Support Levels

• Psychological Pivot at 48,000 – (Range?) lows
• Pre-NFP Mini-Support 47,500 to 47,650 (recent lows)
• Key Support 47,000 (+/- 150) and MA 200
• August highs and November Lows 45,715
• 45,000 psychological level (next support and main for higher timeframe)

Nasdaq 1H Chart – So nothing happened?

zoom_out_map

Nasdaq (CFD) 1H Chart – December 19, 2025 – Source: TradingView

The downtrend in the Nasdaq has officially stalled with short-term action now back in a bull channel.

A major test for bulls will once again be the 25,500 Resistance.

Failing to break it should lead to rangebound action between 25,000 to 25,500.

Nasdaq technical levels of interest:

Resistance Levels

• 25,227 daily highs to break for a bull breakout
• Mini-Resistance 25,500 +/- 75 pts
• intermediate resistance 25,700 to 25,850 (recent highs)
• All-time high resistance zone 26,100 to 26,300
• Current ATH 26,283 (CFD)

Support Levels

• 25,050 Channel retest and 2H 50 MA
• 24,500 Main support
• October and November lows just below 24,000
• Early 2025 ATH at 22,000 to 22,229 Support

S&P 500 1H Chart – Inverse Head & Shoulders forming?

zoom_out_map

S&P 500 (CFD) 1H Chart – December 19, 2025 – Source: TradingView

The S&P 500 1H Chart could be the most bullish looking one if the Inverse Head and Shoulders materializes.

Breaking above 6,850 with high volume would point to a test of the 6,930 All-time Highs or even a few points higher.

Sentiment will need to stay positive!

S&P 500 technical levels of interest:

Resistance Levels

• Range High Resistance 6,880 to 6,900
• 6,930 (current All Time-Highs)
• Weekly highs 6,896
• Mid Range 6,850
• ATH Resistance 6,900 to 6,930

Support Levels

• 6,800 Psychological Pivot and Range lows
• Mini-Support 6,720 to 6,750 (current test)
• Session lows 6,750
• Support 6,720 to 6,750 and 8H MA 50
• 6,490 to 6,512 Previous ATH October lows (recent lows)
• 6,400 psychological support

Safe Trades!

Follow Elior on Twitter/X for Additional Market News, interactions and Insights @EliorManier

Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. The provided publication is for informational and educational purposes only.
If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use.
Visit https://www.marketpulse.com/ to find out more about the beat of the global markets.
© 2025 OANDA Business Information & Services Inc.