Weekly Focus: New Quarter, Old Tricks

The S&P 500 broad index market futures surged by 0.5% to reach 5282 points this week, indicating a notably rapid pace of growth. Despite no trading sessions on Friday, investors had the opportunity to react to the release of important PCE index data for February, which was released prior to the market closure.

Wall Street had anticipated the Core PCE, which excludes volatile food and energy prices, to remain steady at 2.8% year-on-year and decrease slightly to 0.3% on a monthly basis. The actual data aligned with these forecasts. However, the headline PCE index remained at 0.3% month-on-month, falling short of the expected 0.4%. This suggests a potential slowdown in overall inflation, which is considered favorable news for investors.

The increased bets on a potential interest rate cut by the Federal Reserve (Fed) in June, rising to 65.9% from 61.9% the previous week, reflect market sentiment following the data release. U.S. 10-year Treasuries yields retreated to 4.19% from 4.21%, with the potential for further declines as American investors return to trading.

While the SPDR S&P 500 ETF Trust (SPY) reported modest capital inflows of $86.6 million last week, compared to the significant $24.2 billion inflows in the previous week, this single-week drop is not necessarily indicative of a reversal in the current upside trend. However, it warrants monitoring, particularly if inflows turn into outflows.

Investor focus this week will be on PMI data in the United States, following positive numbers reported for China over the weekend. Additionally, attention will be on the March Nonfarm Payrolls data from ADP, scheduled for Wednesday, and the official Nonfarm Payrolls data on Friday. Any deviation from expectations in these data sets could signal shifts in the American economy, potentially influencing Fed interest rate decisions, Dollar strength, and stock market performance.

Technically, the S&P 500 index has surpassed the final upside target zone at 4850-4950 points and entered a period of potential correction opportunities. Therefore, monitoring any reversal patterns that may emerge on the chart is advisable. The existing reversal pattern suggests a standard correction of 5-7%, with potential downside opportunities possibly emerging soon. The market is craving for correction, but when it could start remain unclear. The nearest resistance is at 5300 points, while support is at 5200-5220 points.

In the oil market, prices were trying again to breach the resistance at $87.00-92.00 per barrel of Brent crude. From a technical standpoint, downward pressure prevails in the market, expected to continue throughout mid-May. Therefore, a breakthrough is unlikely. The nearest resistance is at $87.00-92.00 per barrel, while support is at $81.00-83.00 per barrel.

Gold prices, having reached mid-term upside targets at $2000-2100 per troy ounce, established a new all-time high at $2265 following optimistic PCE index data. Prices have surpassed the resistance at $2210-2230 per ounce. If they could hold above this level then the may continue up to the next resistance at $2300. A technical period favorable for downside scenarios has commenced, expected to last until mid-April.

The Greenback slightly paused its strengthening. The EURUSD is trading around to 1.07800. Lower-than-expected PCE data released last Friday could continue to weaken the Dollar further. Betting on both the rising and declining EURUSD remains risky, with a return to the 1.11500-1.12500 area likely, but a drop to 1.05000 should not be excluded.