S&P 500 broad market index futures rose by
0.5% to 6,268 points on Monday, following a sharp 3.4% single-day correction
from the all-time high of 6,436 points set on Friday. The market now appears to
be in a holding pattern, with traders weighing the odds of either a quick
rebound or a deeper pullback. The
primary downside target remains in the 6,030–6,130 zone, which is a standard
5.0% correction from the top. However, such a move
increases the risk of further weakness toward the extreme bearish target of
5,670–5,770 points, a total decline of 11.0%. Seasonality adds weight to this
cautious outlook. September and October are historically the most volatile and
dangerous months for equities. A
deeper decline ahead of this period could become self-reinforcing, especially in
the current geopolitical climate.
Friday’s sharp correction was quickly followed
by a reason for optimism: a dismal July Nonfarm Payrolls (NFP) report. The U.S.
economy added just 73,000 jobs, well below Wall Street’s 106,000 forecast. Even more striking was the revision to June’s
NFP that were slashed to just 14,000 from 147,000. This
significant downgrade casts doubt on the narrative of a resilient labour
market. The unemployment rate ticked up to 4.2% from 4.1%.
In a dramatic
political response, President Donald Trump fired the Commissioner of the Bureau
of Labor Statistics, as
delayed revision had deprived the
Federal Reserve of the justification needed for earlier rate cuts. Earlier employment
numbers justified Federal
Reserve (Fed) Chair Jerome Powell hawkish
tone last week. Meanwhile, Trump’s allies are calling for his resignation,
accusing him of political bias. While Trump confirmed
Powell would not be dismissed before his term ends, he urged the Chair to step
down voluntarily. Meanwhile,
Federal Reserve Board member Adriana Kugler resigned unexpectedly on Friday,
and Trump has pledged to nominate a dovish replacement soon. This will be his
third appointee on the 12-member board. Markets reacted swiftly. Bets on a
quarter-point interest rates cut in September jumped to 80.3%, from 41.3% prior
to the labour report. If economic data continues to be weak
before the meeting in September, the Fed may have no choice but to cut rates.
Large investors responded aggressively on
Friday. The SPDR S&P 500 ETF
Trust (SPY) recorded $4.67 billion in inflows, its highest one-day figure in
months, suggesting institutions are stepping in during sharp dips. For context, similar inflows during March–April helped absorb a 19%
correction, highlighting institutional confidence in staged buying strategies.
This week is relatively quiet in terms of
macroeconomic releases, with only Tuesday’s U.S. services PMI on the docket.
Focus will instead turn to political developments and Federal Reserve
messaging. Friday marks President Trump’s deadline for resolving the Ukraine
conflict. His special envoy, Stephen Witkoff, is expected in Moscow for a final
ceasefire proposal. Should Russia refuse, Trump could impose 100% tariffs on
China and India for buying Russian oil. However, he has left the door open to alternative responses, including a possible elevated tariffs with broad exemptions. Still,
a repeat of the March–April trade war-induced sell-off cannot be dismissed.
The technical picture has weakened. The index
has broken into a bearish formation, with a confirmed sell signal emerging at
6,230 points. The current level is 6,280. Immediate resistance is seen at 6,300–6,320.
If futures fall below 6,200–6,220, a drop toward the 6,030–6,130 support
becomes more likely.
The oil market remains technically stable for
now, though the window may be closing. Brent crude is trading below key
resistance at $71.00–$73.00 per barrel. Current levels hover around $69.40,
pressured by OPEC+’s weekend announcement to increase production by 548,000
barrels per day starting in September. If prices fail to reclaim $71.00 soon,
the next support sits at $61.00–$63.00.
Gold continues to trade within its established
consolidation range of $3,250–$3,450 per troy ounce. After a correction, the
metal has returned to the midpoint at $3,330–$3,350. The current price is
$3,358. This summer flat is likely to persist into mid-August. A breakout attempt
is only probable after that point. Any move below the $3,230 support would
shift the outlook decisively bearish.
The U.S. Dollar fell sharply after Friday’s
weak jobs report. The EURUSD surged to 1.15900, with traders now
eyeing the 1.16500–1.17000 zone as the next key resistance. Beyond that, a broader market reassessment may be needed depending on
Fed communication and U.S. macro data in the coming weeks.