FUNDAMENTAL OVERVIEW
The S&P 500 eventually reached a new all-time highs after a crazy rally since the start of April on growing expectations of an end to the war. The playbook has been very similar to April 2025 when we first get Trump backtracking on tariffs (this time Trump started talking about ceasefire) and then negotiations that kept traders speculating on a resolution.
On Friday, it looked like a deal was within reach after a barrage of positive news. It all started with an Axios report saying that under a compromise proposal under discussion, some of the highly Iran’s enriched uranium would be shipped to a third country, not necessarily the US, and some of it would be down-blended in Iran under international monitoring.
In return, the US would release $20 billion in frozen Iranian funds. Trump denied the release of the funds but more reports citing officials talked about this potential compromise. Iran continued to say that transfer of enriched uranium has never been on the table.
The optimism then gathered steam after Iranian Foreign Minister Aragchi announced that the passage for all commercial vessels through the Strait of Hormuz was declared completely open for the remaining period of the ceasefire. Trump followed up with a post on Truth Social thanking Iran and even calling it the “Strait of Iran”. Finally, Trump told reporters that he expected a deal in a day or two and prohibited Israel from bombing Lebanon.
Everything pointed to an imminent deal, but we started to see some weakness into the weekend after Trump said that the US would keep the blockade of the Strait of Hormuz in place until a deal with Iran was finalized. Traders might have hedged into the weekend due to the risk of an escalation. This is exactly what happened as Iran reclosed the Strait in retaliation to the US blockade.
The good news is that the ceasefire is still holding and we are still getting reports of talks and preference for a diplomatic resolution. The bad news is that the ceasefire is expiring tomorrow unless we get another extension, which is what the market expects given Trump’s track record. The price action continues to be driven by US-Iran headlines, and this is unlikely to change until we get an official resolution.
An extension to the deadline should keep supporting the market on hopes of an eventual breakthrough but if the bombs start dropping again, it's going to be a bloodbath in the markets given the overstretched levels.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that the S&P 500 has surged into new record highs last week and it’s now pulling back a bit amid the renewed US-Iran tensions. The previous all-time high around the 7,040 level might now act as support. If the price pulls back, we can expect the buyers to step in with a defined risk below the support to position for a rally into new all-time highs. The sellers, on the other hand, will look for a break lower to position for a drop into the 6,800 level next.
S&P 500 TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have an upward trendline defining the bullish momentum. If the price extends the fall below the support, we can expect the buyers to lean on the trendline next with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will look for a break to increase the bearish bets into the 6,800 level next.
S&P 500 TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor counter-trendline acting as support for now. The buyers will likely continue to lean on it to keep pushing into new highs, while the sellers will look for a break to extend the pullback into the 7,040 support. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow we have the US Retail Sales. On Thursday, we get the latest US Jobless Claims figures and the US PMIs. The focus remains on US-Iran headlines ahead of the ceasefire deadline tomorrow.
