The S&P 500 broad market index futures are
rising by 0.3% to 5475 points this week, continuing their recovery. To reclaim
its upside trend, the index needs to surpass the resistance at 5470-5490
points, which may take some time given the potential for optimism to wane.
There are, however, reasons for optimism this
week. The Federal Reserve’s preferred inflation gauge declined to 2.5% YoY as
expected, though the Core PCE, excluding food and energy prices, remained at
2.6% YoY, missing the expected 2.5%. This suggests that inflation risks are
still elevated. The recovery of the S&P 500 index has been led by the
industrial sector, with the Nasdaq 100 index rising by 1.1% last Friday and the
Dow Jones adding 1.6%. This optimism could be driven by a higher-than-expected
Q2 GDP, although the latest Manufacturing PMI readings indicated a contraction,
painting a grim picture for the American economy.
Large investors have shown a positive outlook
for the stock market. The SPDR S&P 500 ETF Trust (SPY) reported net inflows
of $6.6 billion last week, following $9.9 billion in net inflows the previous
week. Despite this, it’s too early to declare the downside correction over, as
the downside target at 5200-5300 points remains intact. There are also no
technical signals for an upside move, though such signals could emerge soon.
Several events this week could influence the
market direction. Major tech companies Microsoft (MSFT), Meta (META), Apple
(AAPL), and Amazon (AMZN) will release their Q2 earnings reports, needing to
counterbalance the negative impacts from Netflix (NFLX), Tesla (TSLA), and
Alphabet (GOOG). If they fail, the Federal Reserve might need to provide a
boost. Investors are looking for clarity from the Fed on the possibility of
interest rate cuts in September, though Republican frontrunner Donald Trump has
cautioned against such actions before the November election.
The Bank of Japan and Bank of England will
also hold meetings this week. The BoJ is expected to reduce their monthly bond
purchases, potentially increasing Yen volatility. The BoE is anticipated to cut
interest rates by 0.25 basis points, the first such move since 2020. These
central bank actions will be followed by the release of PMI data for July on
Thursday and Nonfarm Payrolls on Friday, with analysts expecting further
cooling of the U.S. labor market.
Technically, the S&P 500 index's outlook
remains negative, in a downside formation with primary targets at 5200-5300
points. Immediate resistance is at 5470-5490 points, with support at 5370-5390
points. A correction signal has appeared at 5511 points.
Oil prices have dropped near the support range
of $80.00-82.00 per barrel for Brent crude and recovered slightly. The key
question is whether prices will head towards $77.00-72.00 per barrel. This
scenario could change due to the OPEC+ meeting and increasing military tensions
between Israel and Lebanon. A technically favorable period for declining oil
prices ends this week.
Gold prices, having reached mid-term targets
of $2000-2100 per troy ounce, are now targeting extreme levels of $2400-2500.
However, the favorable period for price increases has ended. Prices need to
return above $2400 per ounce to secure the $2400-2500 range for August. For a
downside scenario targeting $2200 per ounce to materialize, support at
$2300-2320 must be breached.
The EURUSD is retesting the support at
1.08100-1.08400. This pivot point could determine the next move, with higher
chances for a rebound towards 1.10000. Elevated volatility is expected
throughout this week.