S&P 500 broad market index futures showed
a modest increase of 0.1% to 5214 points this week, rebounding from a 2.0%
decline observed last Friday when it dropped to 5147 points. Despite
expectations for a continued downturn following the strong U.S. labor market
report, the index managed to rebound by 1.1% and finish the week at 5208
points.
The robust March Nonfarm Payrolls report,
which exceeded expectations at 303,000, along with a surprising decrease in
unemployment to 3.8% from February's 3.9%, and an acceleration in average
hourly earnings to 0.3% MoM, led to a surge in U.S. 10-year Treasuries yields
to 4.40%. Analysts anticipate further increases, possibly reaching 4.50%.
However, bets on interest rate cuts by the Federal Reserve (Fed) in June plummeted
to 46.0%, marking a significant decline from the previous week's 66.0%.
The unexpected rise in the S&P 500 index
on Friday resulted in unexpected losses for many short sellers. The index may
potentially revisit its recent lows at 51247 points, with the extent of the
decline dependent on forthcoming macroeconomic data, starting with the U.S.
Consumer Price Index (CPI) for March. Despite expectations for a rise in CPI to
3.4% YoY from 3.2% YoY, other indicators, including core CPI, are expected to
slow down. However, rising oil prices, up 6.0% for Brent crude benchmark in
March, pose a significant threat.
The release of the FOMC Minutes on Wednesday
will be closely scrutinized in light of the inflation data. The European
Central Bank (ECB) will also announce its interest rate decision on Thursday,
likely leaving rates unchanged but potentially positively impacting stocks.
Additionally, the Q1 2024 corporate reporting season in the United States,
beginning on April 12, may influence market sentiment.
Geopolitical risks, such as potential
escalation in the Middle East following Israel's strike on Iran's consulate in
Syria, remain a concern. However, experts anticipate a limited response from
Iran, which would be favorable for the stock market. U.S. Administration is
betting on it too, but there is always a wild card on the table. So, we should
not exclude a major escalation in the Middle East.
Technically, the S&P 500 index has
surpassed the final upside target zone at 4850-4950 points and entered a period
of potential correction opportunities. Therefore, monitoring any reversal
patterns that may emerge on the
chart is advisable. The existing reversal pattern suggests a standard
correction of 5-7%, with potential downside opportunities possibly emerging
soon. The market is craving for correction, but when it could start remain
unclear. May be it is has already started. If the S&P 500 index drops below
5050 points this scenario would become a primary one. The nearest resistance is
at 5230 points, while support is at 5110-5130 points.
Oil prices are testing
the resistance at $92.00 per barrel of Brent crude. If it fails to hold prices
amid increasing geopolitical tensions in the Middle East it may continue up to
the next resistance at $100 per barrel. From a technical standpoint, downward
pressure prevails in the market, expected to continue throughout mid-May.
Therefore, a breakthrough is unlikely. The nearest support is at $81.00-83.00
per barrel.
Gold prices, having
reached mid-term upside targets at $2000-2100 per troy ounce, established a new
all-time high close to the resistance level at $2300 per ounce. This level
would be hard to breach. A technical period favorable for downside scenarios
has commenced, expected to last until mid-April. The retracement of prices is
highly likely. The nearest support is at $2200-2220.
The currency market is
very volatile this week. However, it has no particular direction in the moment.
Rising borrowing cost in the United States should support the Dollar. The
EURUSD is trading around 1.08200. Betting on both the rising and declining
EURUSD remains risky, with a return to the 1.11500-1.12500 area likely, but a
drop to 1.05000 should not be excluded.