The bearish
stock market has officially started to raise its head in the United States as
the S&P 500 broad market index dipped to 3809 points, or 20.9% below the
opening level of 2022. This 20% downside margin is considered to be a division
point between a bullish and bearish market.
On the flip
side, the S&P 500 index bounced to the nearest resistance level at 3930
points but failed to go up further. There were no clear reasons for such a
bounce, as it could be considered to be a purely technical movement. On the
contrary, however, there are plenty of reasons for the downside. The European
Central Bank’s (ECB) President Christine Lagarde suddenly announced possible
interest rate hikes in July and September.
The bearish
market in the United States, rapid interest rate hikes worldwide, blistering
inflation, high energy prices, and a strong U.S. Dollar are painting a rather
impressive picture. We may expect this autumn to be extremely “hot” for the
global economy and markets. With such a backdrop only mistakes made by the Fed or other central
bankers may not only prompt soaring inflation but a record turmoil in the
markets.
However, we
may expect stabilisation or even a rebound of the stock market this summer
after a drop in May. The S&P 500 index may dive to 3550-3650 before the Fed’s
meeting in June and perform a rebound in the summer. This would not change the overall
bearish sentiment but may create the impression of a dull-scale upside for U.S.
stocks. These actions would only fuel a sharp downside in September. So it is
better to wait for the S&P 500 to hit the 3550-3650 landmark and wait for
this final downside in September to make any moves. However, anyone who is
interested in short-term speculations may try to use the summer upside ride.
This week it
is very possible that the S&P 500 index could decline after Mrs. Lagarde shocked
markets with possible interest rate hikes, business activity in G7 countries is
declining, and the fact that Fed’s Chief Jerome Powell is likely to continue
his hawkish rhetoric as confirmed by the FOMC Minutes. Technically, the market
is ready for a downturn. The S&P 500 index has entered an aggressive
downside pattern with targets at 3550-3650 points. New entry points for deals without significant risks can barely be seen
at the moment.
Brent crude
is stuck within the $112-115 per barrel area as warfare in Ukraine continues and
EU nations are still debating a ban on Russia’s crude. The base scenario for
Brent crude to reach $160-180 per barrel in June has not changed. On the
contrary, it is now in the active stage as crude prices continue to test the
upper margin of the resistance area of $115 per barrel.
Gold prices
reached $1860 per troy ounce on the weakening Dollar. But they only have a few
weeks left to hit the $1940 - $2000 target.
The
Greenback is rolling back as EURUSD reached the first upside target at
1.06500-1.08000. The Euro may move up more aggressively this week inside the
upward pattern. So, any corrections to the support level at 1.05400-1.05600
could present good buy opportunities with the target at 1.07000.
GBPUSD hit
the primary upside target at 1.26000-1.27000. Thus, long positions opened at
1.23300-1.23500 should be closed. For any new, long positions to be opened, a
deep correction to 1.24200-1.24400 is needed.