This week started with the continuing deterioration of the markets. The S&P 500 stock broad market index is drifting at 3930 points after a decline of 0.8% last Friday. The U.S. Dollar is sending signals of a decline but is still holding its position. Brent crude futures are going down by 0.8%.
All these trends combined on a negative political and economic background are painting quite a horrible picture of a possible turmoil that could start this week. The macroeconomic agenda this week could also contribute to it with inflation figures publications expected from the U.S., the Eurozone, and the United Kingdom, together with the publication of the U.S. retail sales and business activity indicators. But the most important event this week will be the parade of the central banks as the Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England, the Swiss National Bank, the Bank of Mexico, the Bank of Taiwan, the Central Bank of Russia, Norges Bank, and the Central Bank of Philippines will all hold their meeting for the last time in 2022.
A week so dense with information is usually come with extremely high sideway volatility. But this time it could be different. Technically, the S&P 500 benchmark may dive below 3890-3900 points, and this is where it could enter an aggressive downside formation with targets at 3600-3700 points by the end of this week. If these targets are reached, this may mean a complete “risk off” with a highly likely avalanche marching towards 3300-3400 points next week. Markets are unlikely to continue such a fall during the Christmas week of December 26-30, but there is likely to be a huge sideway volatility with possible large upside spikes. So, many investors could presume the worst is over and start buying. And this will be the point where the worst nightmare is yet to come. The month of January could become the most dangerous for investors as few would be able to react timely and wisely to a highly possible tremendous decline.
So, this week will provide an indication of a devastating scenario with targets at 2000-2200 points. It might be necessary for urgent actions to be taken if this week brings with it indications of such a scenario taking place.
The oil market is in main focus for investors as it seems to be a leading indicator for stocks. Russia has not responded in any way to a price cap on Russia’s oil exports recently introduced by the European Union. So, crude prices continue to fall amid recession fears. The nearest resistance is set at $78-80 per barrel of Brent crude, and the support is at $68-70 per barrel. The primary target is located within the range of $60-70 per barrel.
Gold has almost erased loses this week as prices rose to $1791 per troy ounce. Further developments are very straight forward. Gold prices may breakthrough $1820-1830 per ounce, flagging an end to the current trend and beginning a long-term upward climb. If prices fail to do so before the stock market collapse, gold prices may dive below $1700 per ounce.
The money market continues to experience elevated volatility that prevents the use of short-term signals. So, it is better to place orders that are attached to longer perspectives. Short trades for AUDUSD were opened at 0.68000-0.68500, and for EURUSD at 1.05000-1.05500. Downside targets for these trades are at 5000 points below opening prices. The same applies to stop-loss orders that are 5000 points above order prices.