FUNDAMENTAL
OVERVIEW

The S&P 500 has been printing record highs almost daily despite the prolonged
US-Iran stalemate and the Strait of Hormuz closure. The rally in April was
justified by easing US-Iran tensions, the constant push for a diplomatic
resolution instead of another full-fledged war and expectations that a deal
would be reached eventually.

Now, we are approaching an inflection point…

In fact, it wasn’t just the US-Iran de-escalation supporting the stock
market, but also the Federal Reserve’s easing bias (the only major central bank to keep that). This has led to an easing
in financial conditions even without rate cuts. Real interest rates have been
falling, with the 1-year real rate being close to turning negative.

There are two main risks ahead: the restart of US-Iran war and a hawkish
Fed. We’ve been getting reports that Trump is now considering a resumption of
the war more seriously as the ceasefire holds on “life support” after
a “garbage” Iran’s peace proposal. Now, this might just be the usual
hawkish rhetoric without substance, but it’s still something to keep an eye on.

If we do get an official resolution, the reopening of the Strait could give
the stock market another boost in the short-term as oil prices will likely fall
and rate cut bets will increase. After that though, the focus will quickly turn
back to the Fed and the economic data.

With the end of the war and the reopening of the Strait of Hormuz, the
increase in economic activity could keep inflation higher for longer and
eventually require rate hikes. There’s also another scenario where the Strait
remains closed for longer and oil prices stay elevated, with the risk that the
Fed turns hawkish anyway.

S&P 500
TECHNICAL ANALYSIS – DAILY TIMEFRAME

On
the daily chart, we can see the S&P 500 continues to extend into new all-time highs almost daily.
The only significant support zone we have is the one around the 7,200 level. If
we get a pullback into it, we can expect the buyers to step in there with a
defined risk below the support to keep pushing into new highs. The sellers, on
the other hand, will want to see the price breaking lower to extend the
pullback into the 7,050 level next.

S&P 500 TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On
the 4 hour chart, we have an
upward trendline defining the bullish momentum. The buyers leant on the
trendline yesterday to keep pushing into new all-time highs, and we can expect
them to continue to do so. The sellers, on the other hand, will want to see the
price breaking lower to pile in for a drop into the 7,200 support next.

S&P 500 TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, there’s
not much we can add as from a risk management perspective, the buyers will have
a better risk to reward setup around the trendline to target new highs, while
the sellers will need a break lower to open the door for new lows. The red
lines define the average daily range for today.

UPCOMING CATALYSTS

Today we have the US PPI report and Trump-Xi meeting. Tomorrow, we get the
US Retail Sales report and the latest US Jobless Claims figures.