This is the last full trading week of 2023 as Christmas and New Year celebrations will keep everybody busy during the last week of the year. Meanwhile, the S&P 500 broad market index continues to go down and may hit is two-week target by the end of this week. The U.S. Dollar is also set to meet its upside targets early.
This week is not expected to be marked by essential macroeconomic statistics that could move markets. The last estimate of the U.S. Gross Domestic Product (GDP) for the year, that will be released this week, is of minor interest. Q3 real consumer spending, that is usually monitored by the Federal Reserve (Fed), will also have minor importance as the Fed already made its interest rate decision last week.
Considering all of the above, the stock market will likely be driven by technical signals that could predict that the S&P 500 index may easily reach within the 3700-3800 point range and within the 3400-3500 point range next week. However, the short Christmas week may prompt the index to slide toward the last target by the end of this week.
The same could be said about the U.S. Dollar which is set to recover. That may mean a target at 1.02000-1.03000 points for the EURUSD. So technically markets are likely to switch to “risk off” mode this week.
There are a lot of rumours in the market that the 3400-3500 area is likely to turn out to be a U-turn for the S&P 500 index. Thus, some analysts suggest long positions should be opened within these levels in 2023. They are trying to confirm this idea by presenting research on inflation peaks for the last 50-60 years that demonstrate that the index was 13-15% above the U-Turn low 12 months after inflation peaks. However, some awkward exclusions in 2000 and 2008, when the index fell by 19-20%, are left untouched. These years do not only correspond to a cyclical crisis which is also seen to be evolving now, but also to a perfect scenario when turmoil may progress after reaching 3400-3500 points along with high volatility when many investors may try to open long positions. This scenario suggests a decline to 2200-2400 points.
The recent correction in the oil market where Brent crude prices recovered to $83 per barrel, confirmed the downside trend. Russia has still not responded to the price cap on seaborne oil at $60 per barrel but is rumored to do so soon. Meanwhile, recession fears are pressing down on crude prices with minor chances for an upside recovery. Brent crude prices are hoovering slightly above the resistance at $78-80 per barrel, but that is seen to be temporary, and could eventually lead to a decline towards the nearest support at $68-70 per barrel. Extreme downside targets are intact at $60-70 per barrel.
Gold prices are charting an upside formation with targets at $2000-2100 per troy ounce by the middle of 2023. Prices may move even faster if technical targets at $1800-1805 per ounce are reached this week. This would activate an aggressive scenario with targets at $2050-2150 by the middle of February.
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.