The S&P 500 broad market index futures are
trading neutral early Friday, reflecting a period of stabilization after a
volatile week. The index managed to erase its earlier 4% decline, a recovery
that seemed improbable just a few days prior. This reversal was largely driven
by positive macroeconomic data, particularly in the U.S. business activity and
labor market.
Key data that supported this recovery include
the Service Sector PMI for July, which surged to 54.5 points, rebounding from
49.6 points that had previously signaled contraction. This improvement in the
service sector helped halt the broader market's downslide. Additionally, the
U.S. labor market showed signs of strength, with Initial Jobless Claims
dropping to 233,000, significantly better than the anticipated 241,000. This
marks the largest weekly drop since mid-2023. While Continuing Jobless Claims
slightly exceeded expectations at 1.875 million, a downward revision to the
prior week's figures suggested a more positive overall labor market trend.
Investor sentiment has been buoyed by these
developments, driving the S&P 500 index up by 2.9%—its largest single-day
gain since November 30, 2022. This surge has re-established an upward trend,
with potential targets in the 5450-5550 point range by mid-September. However,
the rising market volatility indicates that these targets could be reached
sooner. Despite this positive outlook, there are no definitive upside signals
in the market, making the initiation of long trades highly risky at this time.
The ongoing recovery could lose momentum before clear buy signals emerge,
leading market participants to cautiously ride the current wave of optimism.
Large investors are adjusting their strategies
in response to these market dynamics. The SPDR S&P 500 ETF Trust (SPY) has
seen a reduction in net outflows, from $7.7 billion last week to $4.6 billion.
This week, the fund reported net inflows of $672.4 million, though there has
been no significant surge in stock purchases.
Looking ahead, investors are closely watching
for July inflation data, set to be released in the U.S. next Tuesday and
Wednesday. Geopolitical concerns, particularly the potential for a retaliatory
strike by Iran on Israel, are also on the radar, with this weekend being a
possible timeframe for such an event.
Technically, the S&P 500 index outlook has
changed to positive with the upside targets at 5450-5550 points by
mid-September. immediate resistance is at 5390-5410 points, with support at 5290-5310
points.
Oil prices are retesting the support at
$80.00-82.00 per barrel for Brent crude and is seeking the next support, which
is at $70.00-72.00 per barrel. A technical period favourable for oil price
declines is over. So, a recovery from this level is highly likely.
Gold prices, have reached mid-term targets of
$2000-2100 per troy ounce and extreme levels of $2400-2500. Prices may continue
to hoover within the $2400-2500 range in August. The nearest resistance is at $2490-2510
per ounce, while the support is at $2390-2410.
The EURUSD is consolidating after a strong
rally in the last week. The pair has met its primary upside target at 1.10000-1.11000.
Further direction will be prompted by inflation data in the United States next
week.