FUNDAMENTAL
OVERVIEW
The S&P 500 has
been under pressure in the last couple of days as geopolitical tensions
increased following reports indicating that Trump was weighing strikes against
Iran before the midterm elections.
Yesterday, we saw
a rebound after Trump said on Truth Social that the US was having
productive discussions with Tehran and would not attack Iran before the midterm
elections.
Markets reacted by unwinding the escalation premium, with oil prices, Treasury
yields and the US dollar all falling after Trump’s post, improving the risk
sentiment and giving the S&P 500 a boost.
Looking ahead, Iranian Foreign Minister Araghchi said yesterday that Iran
was reviewing US’s latest proposal and expected to reply within the next few
days. A positive outcome would be positive for the stock market, as a selloff
in oil prices would ease inflation and rate hike concerns. A negative response,
however, wouldn’t change much but it could limit the upside momentum.
Next week, we also have the US CPI report on the agenda that could put downward
pressure on the market as traders hedge into the event. Hotter than expected data
could trigger a hawkish repricing, and weigh on the S&P 500, while a soft
report could lead to a relief rally as the hedges get unwound and rate hike
expectations ease.
S&P 500 TECHNICAL ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see that
the S&P 500(CFD contract) pulled back recently amid renewed geopolitical
tensions but has bounced yesterday after Trump ruled out strikes on Iran before
the midterms. If the pullback extends, we can expect the buyers to lean on the
trendline, with a defined risk below it, to position for a rally into new
record highs. The sellers, on the other hand, will want to see the price
breaking lower to extend the correction into the 7,500 level next, with the
7,613 level as the first target.
S&P 500
TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, we can see the
price broke above the minor downward trendline that was defining the recent
pullback. We can expect the buyers to pile in around these levels, with a
defined risk below the broken trendline, to keep targeting new record highs.
The sellers, on the other hand, will want to see the price falling back below
the broken trendline to extend the drop into the major upward trendline.
S&P 500 TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we
have a minor resistance zone around the 7,806 level. The sellers will likely
step in around the resistance, with a defined risk above it, to position for a
drop into the major upward trendline. The buyers, on the other hand, will look
for a break higher to increase the bullish bets into new record highs. The red
lines define the average daily range for today.
UPCOMING CATALYSTS
Today we conclude the week
with the University of Michigan Consumer Sentiment survey, although it’s not
expected to be a market-moving release.
This article was written by Giuseppe Dellamotta at investinglive.com.