This week, the S&P
500 index experienced a modest decline of 0.2%, bringing it to 5,592 points.
Despite briefly dipping to 5,544 points on August 29, these declines were
quickly bought up, indicating strong market support near these levels. The
index remains close to its all-time high of 5,670 points.
NVidia (NVDA) played a
significant, but formal role in the recent market dynamics. The company's Q2
2024 earnings report, while still strong and above consensus estimates, failed
to meet the high expectations set by previous quarters. As a result, NVDA's
stock dropped 6.5% to $117.59, leading to a broader 1.5% decline in the S&P
500.
The market's decline
was reversed by better-than-expected U.S. economic data. The final estimate for
Q2 GDP came in at 3.0% quarter-over-quarter, the highest since Q4 2023.
Additionally, Initial Jobless Claims declined to 231,000 from 233,000, slightly
better than the consensus of 232,000. Continuing Jobless Claims were also
better than expected at 1.868 million, though they were slightly above the
previous week's 1.855 million. This data helped convince investors that fears
of a U.S. recession might have been exaggerated.
Despite the positive
economic data, large investors remain cautious. The SPDR S&P 500 ETF Trust
(SPY) reported a revised net outflow of $996.3 million last week and $3.9
billion this week. This marks the fifth consecutive week of stock sell-offs by
large investors, despite slowing inflation and a dovish Federal Reserve (Fed).
The reasons behind this cautious approach could be related to upcoming economic
reports and Fed decisions.
The market's focus is
now on the Personal Consumption Expenditures (PCE) index for July, set to be
released on Friday. Despite Fed Chair Jerome Powell indicating that inflation
is no longer a primary concern for the Fed, a rise in this indicator could
cause market nervousness. Next week will feature the important U.S. labor
market report for August, to be released next Friday, which is crucial for the
Fed ahead of its September 17-18 meeting. The Consumer Price Index (CPI) for
August, set to be released on September 11, could also add pressure to the
markets ahead of the Fed meeting.
The technical outlook
for the S&P 500 index remains unchanged. The benchmark reached its primary
upside targets of 5450-5550, which should be met by mid-September. However,
this rapid ascent has led to rising overbought tensions. The index is currently
trading above the resistance at 5540-5560 points. If it falls back below this
level, it could continue down to the support at 5410-5430 points. Otherwise, it
may continue its upward trajectory towards 5690-5710 points.
Brent crude oil prices
are stuck at the support level of $79.00-81.00 per barrel, buoyed by increasing
geopolitical tensions in the Middle East. The period favorable for an oil price
increase is expected to last until early September, making a sharp decline from
current levels unlikely. 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. The recent spike above $2,520 per ounce seems to be
losing momentum, but if prices manage to climb higher, a jump to $2,600 per
ounce cannot be ruled out. 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. However, technical
overbought tensions are strong. If the support holds, the likelihood of an
upside scenario with extreme targets at 1.14000-1.15000 will increase.
Otherwise, the pair may tumble lower, with a clearer direction expected after
next Friday's economic data release.