The S&P 500 maintains the bearish bias as the US-Iran war drags on. What’s next?

FUNDAMENTAL
OVERVIEW

The S&P 500 went back
into risk aversion in the final part of last week as prospects of a quick end
to the war faded and oil prices resumed the upward trend towards triple digit
levels.

The market continues to be
driven solely by the US-Iran war and the disruption in the Strait of Hormuz. As
of now, there’s no real solution in sight.

The longer this war drags on,
the greater the negative impact will be on the economy and the stock market, especially
given the Fed’s inability to cut rates without risking another inflationary wave.

The bulls should just wait
for Trump to fold and end the hostilities as that will highly likely trigger a
strong relief rally. Until then, the bearish bias will likely persist.

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 zone as risk aversion returned and eventually dropped close to monthly
lows. The target for the sellers should be the November lows around the 6,540
level. If the price gets there, we can expect the buyers to step in with a defined
risk below the support to position for a rally back into the 6,760 resistance.

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 pulls back to
the trendline, we can expect the sellers to lean on the trendline with a
defined risk above it to keep pushing into new lows. The buyers, on the other
hand, will look for a break higher to increase the bullish bets into new all-time
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 it
to keep pushing into new lows and increase the bearish bets on the break of the swing low around the 6,650 level. The buyers, on the other hand, will look for a breakout to
pile in for a rally into the next major trendline. The red lines define the average daily range for today.

UPCOMING CATALYSTS

On Wednesday we have the US PPI report and the FOMC policy
decision. On Thursday, we get the latest US Jobless Claims figures. The focus
remains on the US-Iran war, so keep an eye on the headlines, especially those
regarding the Strait of Hormuz.