S&P 500 futures are slipping by 0.24% to
5,611 points on Monday after a strong rebound last Friday, when the index
climbed 1.68% to 5,622 points. While the recovery could resume, investors are
currently digesting remarks from U.S. Treasury Secretary Scott Bessent
regarding market corrections. “I can tell you that corrections are healthy.
They’re normal,” he stated late Sunday, while also acknowledging the
possibility of a U.S. recession. However, he shifted responsibility to the
Biden administration, arguing that “if we put tax policy in place,
deregulation, and energy security, the markets will do great.” This signals
that the current administration is unlikely to take direct action, instead
placing the burden on the Federal Reserve and its Chair, Jerome Powell, to
respond by easing monetary policy.
Powell has remained firm on maintaining tight
policies, citing tariff uncertainties as a key risk. However, with stock
markets declining, inflation easing, unemployment rising, and the economy
weakening, he may have to adjust his stance. If he refuses, Trump could shift
blame for the economic slowdown onto the Fed and Powell personally. With
midterm elections still two years away, the Fed may need to support markets in
the short term. A likely move would be emphasizing progress in fighting
inflation, which could be reinforced by projections for three or even four
quarter-point rate cuts in 2025 within the Fed’s dot plot.
Large investors appear to be betting on this
scenario. The SPDR S&P 500 ETF Trust (SPY) reported net inflows of $7.49
billion last week, excluding Friday, suggesting strong confidence in a rebound,
especially given a previous $15.28 billion bet on the upside. If the Fed
signals a more dovish stance, Trump could also soften his position on tariffs,
potentially propelling the S&P 500 towards 5,800–5,900 points. However, if
the central bank remains firm, the decline could deepen.
Technically, while the worst may be over, the
S&P 500 remains in a downtrend. The extreme downside target lies between
5,350 and 5,450 points, with key support at 5,530–5,550 points. A failure at
this level could push the index towards the extreme targets, while a breakout
above 5,700 points would indicate a potential reversal.
Brent crude remains under pressure at $71.30
per barrel, with support at $68.00–70.00 and resistance at $78.00–80.00. Prices
are attempting a recovery, but recession fears continue to limit gains. If
support fails, prices could drop further to $58.00–60.00.
Gold is trading near its all-time high at
$2,997 per troy ounce, with the next resistance level at $2,950–2,980 and an
extreme upside target of $3,200–3,300. The bullish scenario has now become the
baseline. However, if prices fall below $2,850, the outlook would turn bearish.
The U.S. Dollar appears poised for a
correction. The EURUSD has reached its upside target of 1.09500–1.10500 and is
now facing significant overbought pressure. A retracement towards 1.06000 seems
likely, and the pair may struggle to find new upside drivers once the
correction is underway.