FUNDAMENTAL OVERVIEW
The S&P 500 went back into risk aversion yesterday as reports of Iran deploying mines in the Strait of Hormuz and continuous attacks on ships sent oil prices higher again. Yesterday, Trump told Axios that there’s practically nothing left to target in Iran and that the war will end soon.
Unfortunately, the market no longer seems to be buying the “war ending soon” narrative. His comments were largely ignored, as traders now want to see a clear and definitive end to the conflict. His jawboning strategy to keep markets buoyant while continuing the war isn't working anymore.
The longer this war drags on and the higher oil prices go, the worse the impact will be on the economy and the stock market. The bias remains neutral to bearish.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that the S&P 500 fell back below the 6,760 resistance zone as risk aversion returned. This is where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the 6,530 support. The buyers, on the other hand, will look for a break higher to start targeting the 6,900 level next.
S&P 500 TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a downward trendline defining the bearish structure. If the price gets there again, we can expect the sellers to lean on the trendline with a defined risk above it to position for a drop into new lows. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.
S&P 500 TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor downward trendline defining the bearish momentum on this timeframe. We can expect the sellers to lean on the trendline with a defined risk above the major trendline to keep pushing into new lows, while the buyers will look for a break to target a move above the major trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the latest US Jobless Claims figures. Tomorrow, we conclude the week with the US PCE price index, the University of Michigan Consumer Sentiment survey and the Job Openings data. As a reminder, the market focus right now is solely on the US-Iran war, so the data might not matter much.
