This week
ends on a very positive note as the SS&P 500 broad market index rose by
2.3% to 3979.0 points, U.S. 10-year Treasuries yields are down to 3.43% from
3.56%, while the Dollar lost almost 2%. The market gained some inspiration
after the Chairman of the Federal Reserve (Fed) Jerome Powell did not make any hawkish statements during his
speech during the Sveriges Riksbank symposium in Stockholm. He just reassured
the audience that the Fed would adjust its monetary policy to inflation.
The market found
this silence very empowering and saw it as a signal that the Fed may put a a
milder monetary policy stance into action. These hopes were later supported by
the inflation figures that came out at 6.5% for December vs 7.1% in November.
Investors increased their appetite for risk, stocks indexes rose, while bond
yields and the Dollar exchange rates were down. The banks’ earnings Q4 2022
reports on Friday are expected to be disappointing, but the market could simply
ignore them.
The only
rain on the market’s parade came from rather negative forecasts from the
International Monetary fund and the World Bank. They have not only lowered
their economic outlook for the financial year 2023-2024, but highlighted the
elevated risks for 2023, including climate change, massive cyberattacks, and escalations
of the war in Ukraine. It seems that both IMF and WB are hedging against every
possible misfortune rather than sending out proven signals of a forthcoming
crisis or trying to predict a “black swan”. It could also be seen as an effort to
defend themselves from any possible accusations, even if the “black swan” does
flay in another direction.
Technically,
the S&P 500 index changed its formation to the upside with the primary
target at 4100-4200 points. The index is now in the resistance zone between
3980 and 3990 points. It is likely to continue with this range in the first
half of next week, or a scale down towards the support at 3900 points. The
second half of next week is looking to be more positive, as the index may climb
to the next resistance level at 4060-4090 point.
The oil
market is experiencing a lot of small, but positive events that support crude
prices, but do not change the overall outlook. Brent crude prices over $78-80
per barrel are seen to be a temporary departure from this level that could end
a new selloff wave to the nearest support at $68-70 per barrel. The lowest targets
are currently seen at $60-70 per barrel.
Gold prices
are moving inside the mid-term upside formation with targets at $2000-2100 per
troy ounce by the middle of 2023. Prices have exceeded the upper margin of
$1880-1900 per ounce that makes the outlook for future price movements quite
uncertain. Odd price growth during the last week may suggest a further price
rally without any stopovers, but also signal for a possible swift change of a
trend to the downward during elevated volatility.
The money
market has been divided. It continues to experience elevated volatility that
prevents the use of short-term signals. So, it is better to place orders that
are attached to longer perspectives. But now the U.S. Dollar is seen to be
weaker against some currencies and stronger towards others like the Euro.
Whether or not we will see the Dollar moving in different directions against a
basket of other currencies remains to be seen in January. Nonetheless, short
trades for EURUSD opened at 1.06700-1.07200 with a downside target at 5000
points below the opening level and the same 5000 points for a stop-loss order
should be considered very attractive this January.