The S&P 500 broad market index futures
have added 0.2% to reach 5008 points this week. However, the benchmark was near
its all-time high at 5050 points last Friday but failed to sustain those
levels.
Investors expressed disappointment with the
second set of inflation data released last week. The Producer Price Index (PPI)
in the United States increased to 0.9% year-on-year (YoY), surpassing the
consensus of 0.6% YoY. Monthly readings were at 0.3% month-on-month (MoM),
above the expected 0.1%.
In response to the news, U.S. 10-year
Treasuries yields rose to 2.28% on Friday from 2.22%. The S&P 500 index
slipped by 0.48% to 5005 points, marking the first negative week and ending a
5-week upside streak. The stock market in the U.S. is hovering around the
5000-point mark.
The upcoming release of the FOMC Minutes on
Wednesday, along with PMI data in the United States, the United Kingdom, and
Europe, as well as testimonies from several Federal Reserve (Fed) officials,
could significantly impact the markets. Fed officials are likely to reinforce
their hawkish position following recent inflation spikes. However, this stance
might be countered by expected weak PMI data.
The SPDR S&P 500 ETF Trust (SPY) reported
net capital inflows of $640 million last week, suggesting that investors may
have been buying the dips in the stock market. It appears that they could be
waiting for lower prices to increase their long positions.
The S&P 500 has
surpassed the final upside target zone at 4850-4950 points, hinting at a
potential correction. This correction period may last up to the middle of the this
week. Therefore, betting on a rally before that could be risky. Reversal patterns
are anticipated, with the first already emerging, signaling a standard
correction of 5-7% within the next five weeks. The starting point of this
correction is yet to be defined. But before a next all-time high record is
possible.
Oil prices are trying
to push through the resistance at $81.00-83.00 per barrel for Brent crude
benchmark. The ongoing war in the Middle East increases the likelihood of further upside
moves in oil prices above $83.00 per barrel in February and March. The next
resistance is located at $87.00-92.00 per barrel.
Gold prices, having
reached mid-term upside targets at $2000-2100 per troy ounce, are currently retesting
the resistance at $2010-2030 per ounce from the downside. If the resistance
survives prices could slip to $1920 and further down.
Volatility in the currency
market is increasing, with expectations of another wave of the upcoming
downside correction for the Dollar being diluted by strong economic data. However,
the U.S. Dollar failed to strengthen further despite disappointing inflation
numbers. This is a sign of weakness. However, it remains risky to bet on both
the rising and declining EURUSD. A return to the 1.11500-1.12500 area for the
pair is likely, but a drop to 1.05000 should not be excluded.