This super
trading week is gaining momentum. High volatility is seen to be reigning over
the markets after verbal interventions were made by the heads of the Federal
Reserve (Fed) and the European Central Bank (ECB). The January Non-Farm
Payrolls report, which will be published today, may add some positive flavour
to the market.
The S&P
500 broad market index has made it to the resistance level at 4180-4200 points
after the strange behaviour of the Fed’s Chair Jerome Powell. It seems like Mr.
Powell has accidentally entrapped himself and confused markets by awkwardly trying to claim victory over
inflation while justifying all the actions taken by the Fed in 2021 and 2022
while he still can. However, there is a clammy feeling in the air that a
downturn in the stock market is just around the corner.
Big Tech
sector has primarily pushed the market up this week while presenting mixed reports. Apple (AAPL) has failed to meet
analyst’ estimates for revenues, earnings and sales. Amazon.com (AMZN),
Alphabet (GOOG) and Meta Platforms (META) have reported better while also
generating some negative signals. It seems that the market needed to absorb another shock to get investors into a bullish
trap.
The
controversial position of the ECB’s President, Christine Lagarde, had a minor
effect on this chaos. Investors read everything between the lines of Lagarde’s
testimony and sold the Euro against the Dollar despite her formal hawkish
words.
For January
2023, the U.S. labour market is set to generate more volatility on Friday
despite the very conservative expectations of Wall Street. Unemployment is
expected to rise to 3.6% from 3.5% during the previous month, while the Non-Farm
Payrolls report is estimated to go down to 185,000 from 223,000 in December
2022. Our statistical modeling suggests that Non-Farm Payrolls will exceed
185,000 and be close to 220,000. Considering contraction of the initial jobless
claims by 50,000 in January, unemployment could be at 3.5% or 3.6%.
There are
very few positive expectations for the U.S. Dollar in the market. So, any
positive surprises may push the Dollar considerably up.
Technically,
the S&P 500 index continues within the upside formation with the primary
target at 4100-4200 points. The index reached the resistance at 4180-4200
points and went into the downside correction. The nearest support level is seen
at 4080-4100 points. Any spike above 4180-4200 points could be a false start
and is likely to be very short.
Brent crude
prices have failed to get over $87-89 per barrel. The Organisation of Petroleum
Exporting Countries and its allies (OPEC+) has failed to support prices during
its meeting on February 1. Rising crude inventories in the United States are
pushing prices down towards the support level of $77-79 per barrel.
Gold prices
are moving inside the mid-term, upside formation with targets at $2000-2100 per
troy ounce by the middle of 2023. Prices are now returning to $1880-1900 per
ounce. Odd price growth over the last weeks may point to a possible swift
change of a trend to the downside during elevated volatility to rewrite last
year’s lows.
The money
market is still ignoring any upside signals for the American currency. So, any
positive news for the Dollar may strengthen the Greenback rapidly. Considering
the high volatility in the market, it is better to place orders that are
attached to longer perspectives. Short trades for EURUSD opened at
1.06700-1.07200 with a downside target at 5000 points below the opening level
and the same 5000 points for a stop-loss order should be considered very
attractive.