The last trading week of October deliver more negative tunes as S&P 500 broad market index erased most of its gains by the end of the week. Disappointing Q3 earnings for Amazon, Meta, Microsoft and Apple pushed the High Tech Nasdaq100 index down by 2.5%.
Negative results of the Big Techs came as major disappointment of this week, while the second one came from the European Central Bank (ECB) after its President Christine Lagarde said that the ECB sees a looming recession, while making another interest rates hike by 75 basis points to 1.5-2.25%. Lagarde consistently declined to acknowledge recession risk before. So, something extraordinary has happened for such statements to be publicly delivered. Maybe it is recent PMI that demonstrated production and service sectors to look down towards recession. Maybe it’s another trick in order to supports stock markets, to convince that central banks may change their monetary policy soon. However, any disputed about of U-turn in monetary policy are seen out of reality amid inflation of 9.9% and targets at 2.0%.
Strong Q3 2022 GDP data in the United States at 2.6% year-on-year have ended two consecutive declines in the first and second quarter of this year. This could be a reason for complacency, but it is not as the Federal Reserve (Fed) would certainly use these data to justify another jumbo rate hike. Hopefully, the Fed won’t use the GDP data to claim the victory over inflation that is currently at 8.2%. Otherwise, it may lead to a downturn of the U.S, economy and, eventually, to the collapse of the global one.
The S&P 500 index hit primary targets of the aggressive upside formation at 3850-3950 points, and is rolling back now. There are more upside targets at 4100-4200 points to reach. But it would strongly depend on the Fed meeting results next week. Downside targets are far below at 2000-2200 points.
Oil market is heavily dependent on geopolitics. OPEC+ clash with the United States pushed prices above $90 per barrel of Brent crude benchmark, and they are likely to hook above this level. Any downside to $88-90 level are likely to happen after the election in the United States on November 8. So, aggressive downside scenario with primary target at $75-85 per barrel is intact. Long-term expectations that suggest Brent crude prices to dive towards $50-65 per barrel should be rescheduled to the end of January 2023.
Gold prices down slide has exhausted this week. It may resume later on. So far the strong support is seen at $1620-1630 per troy ounce. However, the period of the downside correction seems to be over for now. So, investors may consider closing their short positions for now.
Money market continues to experience elevated volatility. So, any short-term signals are unreliable. GBPUSD has hit is primary upside target at 1.16500. So, long positions opened at 1.11500-1.12000 should be closed. The pressure on EURUSD is still on. Traders are better to wait for October closing to consider other trades.