S&P 500 broad market index futures are
declining by 0.2% to 6025 points but remain above the key 6000-point barrier,
suggesting a strong potential for continued upside. Pullbacks are viewed as
minor and largely insignificant. The current dip in the index and the
strengthening U.S. Dollar are linked to President-elect Donald Trump’s threats
of imposing "100 percent tariffs" on a group of nine developing
nations or so-called BRICS Group, potentially escalating into a trade war or
serving as a negotiation tactic. Investors are leaning toward the latter
interpretation, as evidenced by a modest rise in U.S. Treasury yields to 4.20%
from 4.17%.
Historically, December tends to be a positive
month for the stock market, with the S&P 500 index often building on prior
gains. This year, with the index up 25.0%, historical data suggests an
additional average December gain of 2.4%, potentially driving the benchmark to
6170-6180 points by year-end. An established pattern shows that purchasing
S&P 500 index futures before Thanksgiving and holding until early January
yields an average return of 2.5%. However, the rally may not be
straightforward, with heightened volatility expected later in the week. Key
events include Federal Reserve Chair Jerome Powell’s speech on Wednesday,
coinciding with the release of services PMI data and ADP Nonfarm Payrolls, and
the official November U.S. labor market report on Friday. Analysts predict a
mixed jobs report, with unemployment ticking up to 4.2% from 4.1%, potentially
weakening the Dollar and bolstering expectations for a December rate cut.
The SPDR S&P 500 ETF Trust (SPY) data
currently lacks clarity on large investor positioning, with potential insights
emerging midweek.
From a technical
perspective, the S&P 500’s outlook is unchanged. The index surpassed
initial targets at 5700-5800 points and began a rally toward the 6050-6150
range. The benchmark is close to the resistance at 6030-6050 points and is
likely to continue up to 6030-6050 points when this barrier will be surpassed.
In commodities, Brent
crude prices are hovering at $72.78 per barrel. The nearest resistance is at
$78.00-80.00, with support at $69.00-71.00. The Organization of Petroleum
Exporting countries and its allies know as OPEC+ delayed its meeting until
December 5. Last time such delays were seen was at the end of 2023, when the
large cartel capped its oil production sending prices below $80.00 to $72.00
per barrel for a few weeks. Prices were recovering in the following four months
to $92.00 per barrel. This time according to this scenario, we may see an
initial decline to $60.00 followed by a recovery to $75.00-80.00 per barrel by
March-April 2025.
Gold prices have slightly
retreated to $2,635 per troy ounce this week. The nearest resistance is at
$2,750-2,770. In case of a breakthrough, prices could continue toward
$2,870-2,890, with possible highs of $3,200-$3,300.
In the currency
market, the EURUSD is retreating by 0.5% to 1.05220 this week. The pair continue
to signal a larger recovery to 1.09500-1.10500 by the end of January –
beginning of February. However, this recovery could happen much faster
considering recent oversold tension in the pair prompted by an extreme reversal
pattern.