The S&P 500 broad market index futures
have risen by 1.4% to 5705 points, marking a new all-time high, driven by the
Federal Reserve’s surprise half-point interest rate cut on Wednesday. Investors
are optimistic about a potential soft landing for the American economy, drawing
parallels to 1995, when a similar easing cycle boosted markets. However, there
are significant differences this time around, suggesting risks.
In 1995, the Fed started cutting rates with a
quarter-point reduction, while this time, the cut was a half-point after 13
months of unchanged rates. A more concerning comparison is with 2007, when the
Fed also made a half-point cut after a year of stable rates, which temporarily
pushed the S&P 500 to new highs but eventually led to a deep decline. While
a repeat of the 2007 crash is not certain, the situation remains dangerous.
Former New York Fed President William Dudley has
hinted that the Fed is more concerned about the labor market than it has openly
discussed. The positive reaction in the stock market may be driven by
short-term motivations, such as year-end bonuses and a desire to avoid
accusations of market manipulation before the November Presidential elections.
The S&P 500 has now reached its primary
target of 5700-5800 points, but further upside catalysts are lacking. The index
could rise to extreme targets of 6100-6200 points, but the risk of a sharp
decline is growing. For investors, it may be wise to consider closing positions
over the next six weeks and prepare for a possible market reversal.
Technically, the S&P 500 outlook is worsening. The
benchmark hit its primary target at 5700-5800 points within an upside formation.
Extreme targets are located at 6100-6200 points. Currently, the index is
holding within 5690-5710 points. If it could surpass this range to the upside,
the index may continue to climb towards 5790-5810 points. The nearest support
is at 5590-5610 points.
Brent crude oil prices
fell to the support at $70.00-72.00 per barrel. The Organization of the
Petroleum Exporting countries and its allies (OPEC+) has decided to postpone
production increases by December. Hurricane season has started in the Gulf of
Mexico. Geopolitical tensions in the Middle East are rising. This has provided
some support for prices. The nearest resistance level is at $79.00-81.00 per
barrel. But the reach of this level is unlikely.
Gold has achieved its
mid-term targets of $2,000-2,100 per ounce and extreme target $2,400-2,500. Investors
have pushed through the resistance at $2,490-2,510 per ounce and are targeting
the next resistance at $2590-2610. If no reversal will occur prices could
continue to rise towards $2,650-2,680 per ounce, and possibly further up to $3,200-3,300
per ounce.
The EURUSD surged to
1.11700. This is above the resistance at 1.10000-1.11000, but lower than
1.12000 peak this August. The pair has equal chances to break through the
support at 1.10000 and the reistance at 1.11000. It will be better to wait for
a more pronounced direction. If the support fails, the pair could fall towards
1.05000-1.07000. Alternatively, the pair may rise above the resistance at
1.11000 to the extreme targets at 1.14000-1.15000.