S&P 500 broad market index futures are
retreating by 0.16% to 5639 points after closing at 5651 points on Friday. This
marks the fourth consecutive winning week for the index, bringing it close to
its all-time record of 5670 points. The recent rise is attributed to stable
inflation in the United States, with the Federal Reserve’s (Fed) preferred
inflation gauge, the PCE Index, remaining flat for July, both in headline and
core readings, surpassing Wall Street expectations. Coupled with a 3.0% QoQ
increase in Q2 GDP, this data fuels hopes for a soft landing of the American
economy, signaling a buy opportunity.
Despite this optimism, large investors appear
cautious. The SPDR S&P 500 ETF Trust (SPY) reported $2.7 billion in net
outflows last week, marking the fifth consecutive week of outflows, albeit
better than the previously estimated $3.9 billion. This suggests that while the
index enjoys a positive streak, large investors are still selling off.
Historically, this cautious approach might be
prudent. September and October are traditionally the worst months for the U.S.
stock market, according to data dating back to 1927. Buying during these months
is statistically risky, often resulting in losses. Large investors may be
pausing as others buy, influenced by the upcoming U.S. presidential elections
in November and ongoing economic developments. With the first presidential
debate between Donald Trump and Kamala Harris scheduled for September 10, political
factors will also come into play.
On the macroeconomic front, this week promises
significant activity, with the U.S. labor market report for August due on
Friday. This report is expected to guide market movements and influence Fed
decisions. Wall Street anticipates a decrease in unemployment, which could
further boost the stock market. Before Friday, the S&P 500 may attempt to
reach a new all-time high, driven by other data releases. Manufacturing PMI
will be released on Tuesday, with positive expectations. ADP Nonfarm Payrolls
and Services PMI are due on Thursday, and consensus suggests they will also be
favorable. However, market reaction to this data could be volatile, and it may
be wise to close positions before the Nonfarm Payrolls release on Friday.
Technically, the S&P 500 has reached its
primary upside targets of 5450-5550, likely to be met by mid-September. The
rapid ascent has created overbought tensions, with the index currently trading
above the 5540-5560 resistance level. A drop below this level could see it
decline further to the 5410-5430 support. Conversely, it may continue its climb
towards 5690-5710 points.
Brent crude oil prices
fell below the support level of $79.00-81.00 per barrel. The period favorable
for an oil price increase is ending, making a sharp decline from current levels
plausible. The next support level is at $70.00-72.00 per barrel.
Gold has achieved its
mid-term targets of $2,000-2,100 per ounce and could further consolidate within
the $2,400-2,500 range. Investors are trying to push prices higher above $2,490-2,510
per ounce resistance. But, these efforts are seen unsuccessful now. The next
strong resistance is at $2,600 per ounce. However, there are no strong reasons
for a sustained rally. The immediate support for gold is at $2,390-2,410.
The EURUSD has
returned to its primary upside targets of 1.10000-1.11000. Extreme technical
overbought tensions has been removed. There are some chances the pair could go
further down to 1.10000. If the support holds, the likelihood of an upside
scenario with extreme targets at 1.14000-1.15000 will increase dramatically.
Otherwise, the pair may tumble lower, with a clearer direction expected after this
Friday's Nonfarm Payrolls data release.