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  • Weekly Summary: U.S. Economy’s Soft Landing Is Cancelled, S&P 500 Drops Below 3750

Weekly Summary: U.S. Economy’s Soft Landing Is Cancelled, S&P 500 Drops Below 3750

Central banks across the globe are pulling on the brakes to tame unruly inflation. Russia is going to invade new territories of Ukraine, while Russia is planning to reclaim certain territories of Ukraine and as a result, the European Union will place more sanctions on Russia, including capping export prices on crude oil that originates from Russia.. So, it is likely that a heavy thunderstorm may emerge in the markets over the coming weeks.

The S&P 500 broad market index lost another 3.5% this week to reach 3720 points, nearing June lows at 3635 points. A breakthrough of this support would open the way to a bold downturn by 30-40% from current prices. And there is no doubt this scenario is real as the world’s principal central bank, the Federal Reserve (Fed), is going to sacrifice the economy in order to bring inflation back under control. The Fed made another hawkish move this week by rising interest rates by 75 basis points to 3.25% and announcing it would hike interest rates further by 125 basis points to a startling 4.5% by the end of 2022. Moreover, the Fed’s economic forecast suggests GDP growth to almost a zero level (0.2%) this year, cancelling any hopes for a “soft landing” of the U.S. Economy.

It is worth mentioning the increasing geopolitical tension between U.S. and China over Taiwan and in some other areas of the world. So, the overall picture is rather painted black.

The S&P 500 index is moving within the aggressive downside formation while the primary targets at 3700-3750 points have already been met. If it continues to move towards the downside, and there are minor doubts it would, investors have to be prepared for the extreme drop of the index to 3400-3500 points. So, a short position of the 35% of targeted volume on the index was restored at 3845 points.

The oil market is balancing at the verge of a deep dive, with the first range at $75-85 per barrel of Brent crude. Prices have moved below $89 per barrel by the end of the week. So, they may dive to the primary target of $85 per barrel within the coming weeks, and then perhaps perform a deeper dive towards $50-65 per barrel.

Gold prices are under pressure after they slid below $1680-1700 per troy ounce. So, a primary downside scenario was activated with targets at $1350-1450 per ounce. Thus, another 25% of the target volume was assigned for a short position that was opened at $1680-1700 per ounce area. Any other retest of this area would be perfect to open short positions for those who missed the opportunity.

EURUSD continues to move down after the primary target was completed at 0.97000-0.98000. Next week the pair is expected to move further down towards 0.94000-0.95000. 

GBPUSD has slumped to 1.10700 and may move further down to the area of 1.09500-1.10500.