No ground invasion in Gaza strip was made by Israeli army last weekend despite various rumors and provocations in different parts of the world. Peace summit in Cairo brought no relief to the Israeli-Hamas conflict. Israeli authorities insist that ground operation could be canceled for the exchange of all hostages captured by Palestinians and Hamas complete surrender. The U.S. Navy strike forces and nearing Israel. No relief of the conflict is seen so far. Ground invasion of Gaza strip is just a matter of time and a moment when Israeli army and its allies will be ready for deployment. This week is seen just a right moment for such deployment.
The S&P 500 broad market index fell below the important support at 4260-4280 points. It slipped further down to 4190.7 points on Monday morning, but rolled back 4260 points later on the day. The support level is also moved down to 4210-4230 points. Most of the week the index is expected to hover in the neutral zone above 4210 points. Below this level the index may be struggling. This technical level perfectly match to the to the events scheduled this week. Four companies of the ‘Magnificent seven’ – Microsoft, Alphabet, Amazon.com, Meta Platforms are going to report Q3 2023 earnings. Some disappointment might be delivered, but the overall tone of the reporting is expected to be neutral. Nevertheless, these earnings reports are expected to support the stock market and may be push it even higher. Thus, the first half of the week could be rather positive.
PCE inflation in the United States seems to be the most import story on the macro front of the week. PCE Price Index is the most favorite inflation indicator for the Federal Reserve (Fed). PCE index is expected to slow down to 3.4% YoY in September, but could escalate to 0.3% from 0.1% on monthly basis. Any higher reading may push stock indexes down. The Fed is scheduled to decide on it further monetary policy next week, while monetary decisions of the European Central Bank (ECB) this week would unlikely bring any surprises. European monetary policymakers are expected to raise its interest rates by another 0.25%, reiterate its messages about economic uncertainty and “job to be done” if needed. The decision of the Fed is likely to be critical for the markets.
Any escalation in the Middle East may easily send markets down, and no positive reporting or low inflation would stop them.
Technically, the S&P 500 index downside formation with a primary target at 4100-4150 points and extreme targets at 3700-3800 points has not changed. The nearest support is at 4210-4230 points. Lower readings will open a path to the abyss at 3700-3800 points. A strong resistance is located at 4250-4270 points. Short trade was opened from 4360 points two weeks ago.
Oil market is bracing for impact. Brent crude prices are testing the upper margin of the resistance at $92.00-94.00 per barrel. If prices would pass this level, a rise to $100 per barrel would be a likely scenario. It prices would climb above this level than a path towards $150.00 per barrel will be opened. On the other hand, if prices would roll back below $92.00 level they may continue down to $83.00-85.00 per barrel.
Gold prices are moving inside the mid-term upside formation with targets at $2000-2100 per troy ounce that have already been met. The resistance at $1910-1930 was smashed. Prices are moving towards the $2000 per ounce. There was no sound retest of the $1930 level. Thus, any long trades that were opened are likely to be closed at $2000 per ounce level.
The Greenback was mostly unchanged. It may recover with ease in case of a further escalation in the Middle East. There are almost no good trades at the moment. A short trade with a small amount for GBPUSD from 1.21200-1.21500 with a primary target at 1.20500 and the secondary target at 1.19800 and stop-loss at 1.21700 was closed with a loss at 1.21700. News short trades for the pair could be considered at 1.21150 with targets at 1.20500 and 1.19700.