Weekly Focus: U.S. Retail Sales and WEF

S&P 500 broad market index futures experienced a modest 0.2% increase, reaching 4783 points. The celebration of Martin Luther King Day in the United States prompted reduced market liquidity, despite the ongoing ascent towards new records above 4819 points. The return of American investors on Tuesday could potentially alter the market dynamics.

Last week, stocks faced headwinds due to higher-than-expected consumer prices, contributing to concerns about inflation. However, lower-than-expected producer prices, reported at 1.0% YoY compared to the 1.3% consensus and -0.1% MoM versus the 0.1% forecast, provided some relief. Investors interpreted lower producer prices as a precursor to a decline in headline inflation. While this explanation might seem naive, it could be invoked again when a market correction is more imminent. The SPDR S&P 500 ETF Trust (SPY) has reported capital outflows over the past three weeks, indicating investors' apprehensions about a potential stock market correction.

Despite the looming concerns, the market is anticipating a potential top. The upcoming week lacks significant macroeconomic data, with U.S. retail sales data on Wednesday being a notable exception. Analysts anticipate a slight increase to 0.4% MoM from 0.3% in November, potentially providing the impetus for the S&P 500 index to achieve a new record. Additionally, remarks from the President of the European Central Bank (ECB), Christine Lagarde, at the World Economic Forum in Davos could introduce volatility in the currency market, potentially causing the EURUSD to rise.

The week also includes the release of China's Q4 2023 GDP, expected to rise by 5.2% compared to 4.9%. Coupled with a potential recovery of inflation in the Eurozone and the United Kingdom, these factors may contribute to currency market volatility.

The S&P 500 index is teetering on the edge of new highs, currently hovering around 4760-4780 points, with final upside targets at 4850-4950 points potentially achievable during the week.

Oil prices retraced below $78.00 per barrel after briefly exceeding $80.00 per barrel for Brent crude due to ongoing military actions by the U.S. and the U.K. against Houthi rebels in Yemen. Prices remain near the support at $74.00-76.00 per barrel, suggesting that additional geopolitical escalations in the Middle East are necessary for further upward momentum.

Gold prices, having previously reached mid-term upside targets at $2000-2100 per troy ounce, continue to fluctuate within this range. Bouncing from the support at $2010-2030 per ounce, prices face resistance amid a weak Dollar. A potential technical weakness period may lead gold prices to $1920 if they breach the $2010 per ounce support.

The Greenback is in a consolidation phase, hinting at a potential upcoming downside correction, even though it has reached its primary correction targets at 1.11500-1.12500 against the Euro. Monitoring potential reversal signals is recommended, as the Dollar may strengthen unexpectedly.