S&P 500 broad market index futures are
trading neutrally near the 6,000-point mark on Monday, as the benchmark
approaches a key resistance at 6,040. This level is seen as a pivotal threshold
that could unlock a further rally toward the extreme upside targets of
6,300–6,400 points. The spotlight this week is on U.S.-China trade negotiations,
set to take place in London. Market sentiment is cautiously optimistic
following last week’s “very good” phone call between U.S. President Donald
Trump and Chinese President Xi Jinping. Should the talks yield concrete steps
toward reducing trade barriers, the S&P 500 may break decisively above the
6,040 resistance. On the other hand, vague diplomatic rhetoric about
maintaining dialogue without real progress could disappoint investors and keep
the index capped.
This is especially important as the index
faces additional tests later in the week with the release of U.S. inflation
data. Wall Street anticipates a
rise in headline inflation to 2.5% YoY in May from 2.3%, with Core CPI expected
to edge up to 2.9% YoY from 2.8%. A hotter-than-expected inflation readings could initially weigh on equities, especially
if the uptick is attributed to higher tariffs introduced by the Trump Administration.
However, any negative market reaction could be short-lived
if trade negotiations with China deliver substantial progress, leading
investors to believe the worst inflation-related risks have already been priced
in.
Another potential source of support for
markets could come from the apparent cooling of tensions between Trump and Elon
Musk. Over the weekend, Musk made efforts to de-escalate the public feud that
rocked markets last week. His father, Errol Musk, suggested Elon’s earlier
accusations against Trump were made under stress. Subsequently, Elon Musk
aligned himself with Trump’s criticism of California Governor Gavin Newsom and
publicly urged the governor to apologize to the people of Los Angeles for
mismanagement during ongoing unrest. While Trump has yet to respond, a
reconciliation between the two influential figures could restore some investor
confidence.
Despite these developments, large investors
remain cautious. The SPDR S&P 500 ETF Trust (SPY) recorded net outflows of
$2.85 billion last week, a sharp increase from $540 million the week prior.
This could suggest institutional players are either waiting for a confirmed
breakout above 6,040 or stepping back for the summer holiday period.
Technically, the S&P 500’s outlook has
improved. Futures remain within an upward trend, having already tested the
primary upside target of 5,940–6,040. The benchmark’s return to the 5,940 zone
increases the probability of a move toward 6,040. A breakout above this level
would likely activate the next upside targets at 6,300–6,400. Conversely,
failure to maintain momentum above 5,940 would increase the risk of a pullback
toward the 5,840–5,860 area.
In commodity markets, Brent crude remains in a
bearish technical phase despite recent gains. After falling from resistance at
$67.00–69.00 per barrel, prices have mounted a modest rebound and currently sit
at $66.60. However, immediate support remains at $57.00–59.00, and over a
multi-month horizon, the potential for a move toward the $75.00–77.00
resistance zone remains intact.
Gold prices have retreated after failing to
break and hold above resistance at $3,330–3,350 per ounce. The inability to
sustain last week’s gains led to a pullback toward the $3,230–3,250 support
zone. Currently trading at $3,322, gold continues to face downside pressure.
The base case scenario suggests a further decline toward $3,030–3,050.
In the currency markets, the U.S. Dollar remains
under pressure. The EURUSD briefly dipped to 1.13900 after
stronger-than-expected Nonfarm Payrolls data (139,000 jobs added vs. 126,000
expected). Nevertheless, the pair is still trading above the key 1.13500 level,
currently at 1.14370. This keeps the bullish scenario alive, with potential for
a breakout above the November 2021 high of 1.15730 looking increasingly likely.