FUNDAMENTAL
OVERVIEW
The strong bullish momentum
in the S&P 500 has waned recently as the prolonged US-Iran stalemate brought
the attention back to underlying risks.
The constant push for a
diplomatic resolution instead of another full-fledged war has been supporting
the risk sentiment on expectations that a deal would be reached eventually.
Nonetheless, the stalemate is causing oil prices to rise, and we are now back
around triple digit levels.
That looks unlikely to
change anytime soon as Trump has rejected Iran’s proposal to first open the
Strait of Hormuz and then hold nuclear talks. Unfortunately, with stock prices
at all-time highs Trump might not feel any pressure to concede.
Therefore, we might get stuck
in a longer consolidation phase until the next major catalyst.
This might even set the
stage for the next big selloff if the Strait of Hormuz remains closed for much
longer and oil prices stay elevated, thus forcing the Fed to hike interest
rates in the coming months.
Today, we have the FOMC
policy decision and although the Fed is expected to keep everything unchanged
amid the US-Iran uncertainty, there’s a risk of a more hawkish leaning due to
resilient US data and a longer than expected US-Iran war. A neutral Fed
shouldn’t bring much volatility, but a more hawkish one could trigger a bigger pullback.
S&P 500
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see that
the momentum in the S&P 500 has
waned recently amid the US-Iran stalemate. 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 can see the
consolidation has led to a break below the major upward trendline. This generally
precedes a bigger pullback or a more extended consolidation before the next
move. Again, from a risk management perspective, the buyers will have a better
risk to reward setup around the support to keep pushing into new highs, while
the sellers will wait for a break lower to open the door for new lows.
S&P 500 TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we
have a minor resistance zone around the 7,190 level. The sellers will likely
continue to step in around these levels with a defined risk above the resistance
to position for a drop into the 7,040 support. The buyers, on the other hand,
will look for a break to pile in for a rally into new record highs. Tomorrow, we get the US Q1 GDP, the
US Employment Cost Index and the latest US Jobless Claims figures. On Friday,
we conclude the week with the US ISM Manufacturing PMI
