The S&P 500 broad market index futures are
up 0.2% to 5294 points this week, surpassing the resistance at 5260-5280
points, indicating a bullish market sentiment. If the index maintains above
this level, it could potentially continue its upward trajectory towards the
5360-5380 milestone and possibly reach a new all-time high.
Last week, the index faced a precarious
situation, dropping by 2.0% to 5191 points on Friday, nearing a downturn
towards 4900-5000 points. However, the release of the April PCE Index data, which
met expectations and showed a lower Core PCE on a monthly basis, helped the
index recover.
U.S. 10-year Treasury yields decreased to
4.49% from 4.55% following the news. Bets on a Federal Reserve interest rate
cut in September increased to 47.0%. The S&P 500 index managed to erase
most of its weekly losses, closing at 5293 points. This recovery was bolstered
by a $3.6 billion fund inflow into the SPDR S&P 500 ETF Trust (SPY) at the
end of last week, marking a third consecutive week of positive results. Large
investors are consolidating their upside positions. Extreme targets lie at
5650-5750 points, which seem contingent on the Fed cutting rates. Without clear
signals from the Fed, further upward movement in the index remains fragile.
However, potential monetary easing by the European Central Bank (ECB) and the
Bank of Canada (BoC) could support global stock markets.
The Canadian regulator is anticipated to cut
its interest rate to 4.75% from 5.00% on Wednesday, which would be the first
rate cut since March 2020. Similarly, the ECB might reduce its rate to 4.25%
from 4.50%, marking the first reduction since March 2016. These potential rate
cuts could prompt other developed nations to follow suit, which would be
positive for stocks globally. The Fed might join this trend in September or
later this year.
Other significant events this week include the
release of the May Nonfarm Payrolls data on Friday. Prior to this,
manufacturing and services PMIs will be released in China, the Eurozone, the
U.S., and the U.K. ADP Nonfarm Payrolls on Wednesday may provide early
indicators for the official U.S. labor market report due on Friday. Wall Street
analysts expect neutral indicators with a cooling labor market, which would be
positive for stocks.
The Organization of Petroleum Exporting
Countries and its allies (OPEC+) also supported stocks by announcing an
extension of oil production cuts through September. Investors had expected
these cuts to extend through the end of 2024. This decision reduces inflation
risks but has led to a decline in oil prices.
From a technical perspective, the S&P 500
index outlook has improved. The index has met its primary targets at 5250-5350
points. Extreme targets lie at 5650-5750 points, though these levels seem
unrealistic in the near term. A climb above 5370 points would signal this
scenario starting to materialize. Immediate resistance is at 5350-5370 points,
with support at 5260-5280 points.
Oil prices fell following the OPEC+ meeting,
which did not provide strong enough support. The cartel plans to increase oil
production in October, significantly boosting supply. Prices are now testing
the support at $80.00-82.00 per barrel of Brent crude, with a significant
downside risk if this support level is breached. The nearest resistance is at $89.00-91.00.
Gold prices, after reaching mid-term targets
at $2000-2100 per troy ounce, are seeking extreme targets at $2400-2500. There
is limited room for further increases, and a pullback could soon occur. For a
downside scenario to materialize, the support at $2290-2310 must be breached.
Immediate resistance is at $2390-2410.
The U.S. Dollar continues to struggle to break
through the EUR/USD support at 1.08000-1.08200. Primary upside targets at
1.08950 have been met. If the pair slips below 1.08000, a drop to 1.05000 could
occur in the mid-term. Interest rate cuts by the ECB and BoC could support the
Greenback.