The decline
of the S&P 500 broad market index stopped at 4145 points. This point is
right in the middle of the possible downside targets which are within an
aggressive downward pattern this week. The index rebounded to 4270 points. If
it closes Friday above 4190 points, a strong rebound next week could be
possible.
For this to
happen the Federal Reserve (Fed) should be more afraid of the recession than
galloping inflation. This scenario could be justified after the U.S. GDP
unexpectedly plunged by 1.4% in Q1 2022. This may be a reason for the Fed not
to rush with a decision on monetary tightening during its meeting on May 3-4. This
does not mean that a probable cyclical drop of the U.S. stock market over the
next 8-12 weeks is still not in the cards. Moreover, such a move by the Fed may
create the perfect ground for such a scenario to take place. The market is less
inclined to decline once retail investors see the horrible GDP fall and this week’s
corporate earnings reports, which could cause the market to plunge down further,
while large institutional investors could bet on a rebound. So, a tactical move
by the Fed to hold monetary tightening for a future date would calm retail
investors.
An aggressive
downward pattern on the S&P 500 index is intact. But if the index closes
this Friday above 4190 points, this level would become a strong support for the
whole of next week. Technically, next week may provide good opportunities for a
rebound of the stock market. Thus, short positions that were opened at
4480-4530 should be at least reduced by half. If the index closes this week
below 4190 points, the downward pattern may be extended to 3850-3900 points and
even further to the 3400-3500 level. In this case the remaining part of short
positions would be quite useful.
Brent crude
prices are levitating towards the resistance level of $112-115 per barrel. In
case of a breakthrough of this resistance level, the upside scenario with
targets at $160-180 per barrel will be activated. The European Union is seen to
be closing in on a Russian oil ban that may be imposed in the middle of May.
This looks like perfect timing as the oil from U.S. strategic reserves and from
U.S. allies would flood the market. Technically, it seems like a good time for
such an upside scenario.
Gold prices
failed to touch the support at $1840 per troy ounce and rebounded from $1870
per ounce to the $1916. The favourable downside period for weak gold prices is
over and the next bearish start line may emerge at the end of May. The nearest
resistance level so far is located at $1940 and $2000 per ounce. This could be
the targets for which gold prices are headed.
EURUSD has
reached an extreme downside target at 1.04500-1.05500, however another downside
spike to 1.03500-1.04500 may be possible before a good chance of a strong
rebound emerges. So, it is better to be prepared to open long positions for the
Euro next week.
GBPUSD also
plunged this week to reach an extreme low at 1.24100. No new lows have been
seen at the moment. So, next week good buy opportunities may emerge with
targets at 1.27800-1.28000.