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.