The S&P 500 stays rangebound as traders await Trump’s decision on ceasefire or full-scale war
FUNDAMENTAL OVERVIEW
The S&P 500 has been mostly rangebound this month as the US-Iran crisis brought back inflation and growth risks. This has also happened amid overcrowded stock market positioning which has led to deleveraging across the board.
Last week’s soft US inflation data helped limiting the downside as the peak inflation narrative got stronger and we got a dovish repricing in Fed interest rates expectations. Nonetheless, the situation in Middle East is weighing on sentiment as there’s good chance of things getting worse before they get better.
Axios reported today that Trump is nearing a decision between a 10-day ceasefire to reopen the Strait of Hormuz and a full-scale war with Israel against Iran. It goes without saying that a ceasefire would be positive for the stock market, while a full-scale war would open the door for new lows.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see the S&P 500 has been mostly rangebound amid the US-Iran crisis. The upside remains limited until we get a clear de-escalation. The sellers continue to target the 7,200 support. If we get there, we can expect the buyers to step in with a defined risk below the support to position for a rally into new record highs with a much better risk to reward setup.
S&P 500 TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a minor support zone around the 7,475 level that’s been limiting the downside and keeping the S&P 500 in a range. We can expect the buyers to continue to step in around the support with a defined risk below it to keep targeting the resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 7,357 level next.
S&P 500 TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have formed a tighter range recently with a resistance around the 7,540 level. The sellers will likely step in around the resistance with a defined risk above the recent high to keep pushing into new lows. The buyers, on the other hand, will look for a break to increase the bullish bets into the record highs. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the Flash US PMIs. The focus remains on US-Iran headlines.
This article was written by Giuseppe Dellamotta at investinglive.com.
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