The S&P 500 broad market index futures
have risen by 1.7% to 5436 points, marking all-time highs for the fourth
consecutive day. The index may continue its upward trajectory towards new
extreme targets at 5650-5750 points. Key factors driving the rally include favorable
inflation data and investor sentiment. U.S. consumer inflation for May dropped
to 3.3% year-over-year, better than expected, with the monthly reading
remaining flat. The producer price index (PPI) declined to -0.2%, the largest
contraction since October 2023.
Despite the Federal Reserve (Fed) raising its
inflation outlook to 2.8% YoY from the previous 2.6% forecast in March, and
predicting only one interest rate cut in 2024 compared to three cuts forecasted
in March, market players are not fully convinced by the Fed's hawkish stance.
U.S. 10-year Treasuries yields have dropped to 4.25% from 4.43%, and bets on
interest rate cuts by the Fed in September have increased to 64.9% from 49.0%.
Investor sentiment is strong, as evidenced by
the SPDR S&P 500 ETF Trust (SPY) reporting net fund inflows of $3.2 billion
this week, a significant turnaround from net outflows of $6.9 billion the
previous week. Large investors are optimistic about the continued rally in
stocks, supporting the case for reaching the extreme targets.
Upcoming retail sales and June PMI readings in
the United States could influence market sentiment next week. However, with
current low inflation, any consolidation in the index is expected to be
temporary, followed by a continued rally.
From a technical
perspective, the S&P 500 index has surpassed its primary targets at
5250-5350 points and is now aiming for the extreme targets of 5650-5750 points,
potentially achievable by mid-July. Immediate resistance is at 5460-5480
points, with support at 5360-5380 points.
Oil prices are
resting slightly above the support at $80.00-82.00 per barrel of Brent crude.
OPEC+ plans to increase oil production in October limited the upside
opportunities for oil prices. A decline towards $70.00 per barrel and a rise to
$90.00 per barrel has equal chances to materialize.
Gold
prices, after reaching mid-term targets of $2000-2100 per troy ounce, are now
eyeing extreme targets of $2400-2500. There is limited room for further
increases, and a pullback could soon occur. For a downside scenario with a
target of $2200 per ounce to materialise, the support at $2290-2310 must be
breached. Immediate resistance is at $2390-2410.
The U.S. Dollar has
shown significant volatility, currently strengthening by 1.0% to 1.07050
against the EURUSD after recovering losses post-inflation data release. The technical downside target is now 1.05000 for EURUSD.