Weekly Summary: Nonfarm Payrolls

The S&P 500 futures edged up by 0.18% to 5,917 points, reflecting a continuation of the lackluster trend following a disappointing Santa rally. For the benchmark to align with January’s average performance, it would need to rise by 4.0% above its all-time highs, but there are currently no clear catalysts to propel it to such levels.

Investor sentiment remains mixed. While the SPDR S&P 500 ETF Trust (SPY) saw net inflows of $18.1 billion and $4.6 billion over the past two weeks, offsetting a $21.3 billion outflow three weeks prior, this week’s net outflows of $2.2 billion (excluding Thursday and Friday) suggest some recalibration. Speculation persists over whether this reflects technical portfolio adjustments or strategic positioning ahead of U.S. President-elect Donald Trump’s inauguration on January 20. Depending on the scenario, the index could see a 4.25% rise or remain neutral by month-end.

Technically, the S&P 500 is shifting downward, targeting 5,650-5,750 points. The current range-bound trading environment makes initiating long or short positions premature. A break of the 5,910-5,920 support or 5,960-5,980 resistance is necessary for clearer momentum. Investors are closely watching Trump’s initial policies post-inauguration and the Federal Reserve’s response during its January 28-29 meeting.

Macroeconomic data points to rising inflationary pressures. Services and Manufacturing PMIs are improving, and initial jobless claims are declining. While ADP Nonfarm Payrolls disappointed with 122,000 new jobs, its correlation with official payroll data has weakened. Consensus estimates December Nonfarm Payrolls at 164,000, with unemployment steady at 4.2% and average hourly earnings slowing to 0.3% MoM. A stronger-than-expected report could sustain market neutrality, but a significant miss might spark volatility, particularly in the Dollar, which could enter a correction.

From a technical perspective, the S&P 500’s outlook has changed. The index surpassed initial targets at 5700-5800 points and hit the targets at 6050-6150, retreating to the downside. Now the benchmark has entered a downside formation targeting 5650-5750 points. The benchmark is trading within the support at 5910-5920 points. If it continues to the downside it could slid towards 5810-5830 points. The resistance is at 5960-5980 points.

In commodities, Brent crude prices are hovering at $78.80 per barrel. The nearest resistance is at $78.00-80.00, with support at $69.00-71.00. It is unlikely that prices are going to break through the resistance to continue up.

Gold prices are at $2,681 per troy ounce this week. The nearest resistance is at $2,670-2,690, while the support is at $2570-2590 per ounce. Despite headwinds, the outlook for gold remains bullish, supported by technical and macroeconomic factors.

In the currency market, volatility has subsided, and the EURUSD is consolidating around 1.0300. Traders are awaiting the Nonfarm Payrolls report due Friday. The pair targets 1.0470-1.0570, and a breakout above 1.0570 could confirm an upside scenario with further targets at 1.0950-1.1050.