The S&P
500 broad market index declined by 0.2% to 4583 points this week, but it
remains above the support level at 4540-4560 points. Given some positive news,
there's potential for the index to rebound towards the resistance at 4650
points.
This week
saw no significant negative news for the U.S. stock market. On the contrary,
the Service PMI rose to 50.8 points from the previous month's 50.6, providing
some optimism for investors. However, this wasn't sufficient to alter the
Federal Reserve's (Fed) monetary stance. The consensus among investors is a
likely pause in Fed's interest rates at the upcoming meeting, supported by
97.7% of investors. The probability of the first interest rate cut by the Fed
stands at 53.4%.
Major
optimism stems from the oil market, where Brent crude prices fell by 6.7% to
$73.86 per barrel, the lowest since June 29. U.S. Treasuries' yields also
dropped, with the 10-year sovereign debt yields declining to 4.10% from 4.25%.
The decline in crude prices supports a slowdown of inflation, prompting further
easing of Fed's monetary stance and setting the stage for the anticipated
Christmas rally.
Investors
are eagerly awaiting the U.S. labour market report due today. The consensus
predicts the unemployment level to remain at 3.9%, with Nonfarm Payrolls
expected to rise to 180,000 in November from the previous month's 150,000.
However, our statistical modeling suggests a more conservative estimate for
Nonfarm Payrolls between 150,000 and 180,000. Both estimates are above 103,000
calculated by ADP. The unemployment has equal chances to remain at 3.9%, and to
edge higher to 4.0%.
If U.S.
labour market cooling would be at maximum estimated then Christmas rally matter
may be regarded as closed. Even the Fed could not alter a positive sentiment of
the market next week. Thus, the labour market report is very important this
time. The market reaction to the report is anticipated to be significant.
Technically,
the S&P 500 index has passed a potential reversal period and entered a secure
territory. The benchmarks is accommodating itself well to make a new movement. The
weekly resistance is located at 4650 points. The nearest support is at
4540-4560 points. Weaker than expected U.S. labour market report could send the
benchmark towards 4650 points.
OPEC+ seems
to be losing ground despite an additional 1 million bpd production cut. Crude
prices are decreasing, contrary to the usual trend following such cuts. Typically,
such cuts resulted in a 30% rise of crude prices in the following months. This
time a consolidation of Brent crude prices below the resistance at $83.00-85.00
per barrel translated into a decline towards the nearest support is at
$74.00-76.00 per barrel. The next support is located at $65 per barrel. Leaders
of Saudi Arabia and Russia may have discussed this matter during their recent
meeting.
Gold prices
are moving inside the mid-term upside formation with targets at $2000-2100 per
troy ounce that have already been met. Prices broke through the resistance at $2100
per ounce to $2141 level and rolled backed to the nearest support is at $1990-2010
per ounce. Prices are rolling back pushed down by a technical weakness period
that will last by mid-January potentially leading gold prices below $2000 per ounce.
The
Greenback moved lower its primary correction targets at 1.08500-1.09500 against
the Euro to 1.07800. Further correction is tied to the prospect of a Christmas
stock rally. In this scenario, the EURUSD may rise towards 1.12000-1.13000.
Alternatively, the Greenback could resume its strengthening towards parity with
the Euro.