Weekly Summary: Powell and Walmart “Slammed” S&P 500

No rebounds of U.S. stock indexes were recorded this week. The S&P 500 broad market index futures were trying to rise above 4050 points in the first half of the week and this fueled hopes for a possible recovery. But the Federal Reserve (Fed) leader Jerome Powell and the weak U.S. retail sector corporate earnings reports knocked out the “bulls” form the market, sending indexes to new lows.

In his speech at the Wall Street conference this week Mr. Powell continued to promote anti-inflation policy conducted by the Fed without any changes amid stock downturns. The investment community is widely debating a possible recession in the United States while only the Fed sees no harm to the economy during the rapid monetary tightening cycle.

Investors are extremely frightened of this perspective as more and more non-cyclic companies like Walmart this week are missing profit expectations. Investors are convinced the Fed may sacrifice economic growth to surging inflation, which is at its highest in the last 40 years but would miss both targets. Thus, a record plunge of the stock market and the economy, which have not been seen over the last 40 years may hit the market.

The basic scenario suggests that the stock market could have a chance to recover this summer but would suffer badly in the autumn. However, the recovery is likely to start at 3500-3600 points on the S&P 500 index, which is lower than the previously expected 3800-3900 points.

U.S. officials are still trying to convince EU leaders to set a ban for Russia’s crude imports. Import duties and G7 price control over Russian crude prices were discussed, but without significant progress. These options, in reality, would lead to a single possible outcome – Russia’s oil would be directed elsewhere, and crude prices would surge. The bulls are set to run after a breakthrough of the crucial resistance level at $112-115 per Brent barrel. This breakthrough could happen at any moment and would launch a $160-180 per barrel of Brent scenario.

Gold prices received an opportunity for an upside as the U.S. economy is seen to be on the downside track. However, it is not realistic that previous price targets of $1940 and $2000 per troy ounce are to be reached now as this window of the upside opportunities would close in 10 days.

The Greenback is losing ground while the EURUSD has established an upside pattern with the targets at 1.06500 and 1.08000. The nearest good buy entry points are located within 1.04400-1.04600. Next week could be good timing to open such long positions as leaving them over a weekend would be too risky.

GBPUSD is climbing aggressively to 1.26000-1.27000 targets and could reach these levels by the middle of next week. So, any long positions opened at 1.23300-1.23500 would be wise to keep open with the stop-loss order set above this level to prevent any possible losses. Long positions should be halved as the price crosses the 1.26000 level.