This trading week is expected to be less tense than the two previous ones. It looks like markets may have a short break before a new wave of sell-offs could begin in December. The S&P 500 broad market index may dive below 3000 points by the end of 2022, that would mean a 25% off the current values at 3980 points. The decline, however, could be much deeper and may continue through January-February 2023.
The G-20 Summit will begin on Tuesday in Indonesia, with the main focus being on the meeting between the leaders of the U.S. and China, Joe Biden and Xi Jinping. Many believe this meeting will not bring about a successful deal between the two nations as there remain too many undecided issues given the current tension between the world’s two major economies. Others believe a broad deal between China and the United States is possible and this may cover everything from geopolitics, including Taiwan and Ukraine, to the relations between the Federal Reserve and the People’s Bank of China.
How these negotiations will be presented by officials of both parties will be very important. It would be wise to expect these negotiations to be portrayed in a cold light and probably
have no effect on the markets in the first half of this week. The second half will be guided by the October Retail Sales figures in the United States that are expected to tick up to 0.9% from the previous 0.0%. The presentation of the second version of the budget of the UK by the new British PM Rishi Sunak and finance minister Jeremy Hunt will also be of paramount importance as the previous presentation by former PM Liz Truss and finance minister Kwasi Kvarteng led to a debt crisis in the UK.
Andrew Baily, the governor of the Bank of England, is also expected to talk about inflation this week. The tone of his speech is likely to be negative and may contribute to the decline of the S&P 500 index on Wednesday and the rest of the week. Technically, the index is inside the upward formation with targets at 4100-4200 points by the middle of December. The nearest support level is at 3880-3900 points and the nearest resistance is at 3980-4000 points. So, the index is likely to stroll between these levels. However, long-term targets as still far below at 2000-2200 points.
Brent crude prices are still inside the aggressive downside formation with targets at $75-85 per barrel which have already been met. If prices rise above $96 this week they would have a chance to jump to $105-125 per barrel.