Last Friday, the S&P 500 sold off into the close as we got risk off flows across the board due to news of imminent Iranian retaliation. Over the weekend, Iran launched its operation with drones and missiles against Israel but almost all of them were intercepted and there were no casualties. In the end, Iran said that the operation was deemed concluded and we got reports of general de-escalation with the US telling Israel that it won't support a retaliation. We might see some positive risk sentiment and probably gap up with the economic data being in focus next.
S&P 500 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the S&P 500 has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. The break of the trendline and the 21 moving average could be a bad omen for the buyers as it opened the door for a bigger correction into the 4713 level. The price fell into the first key support level at 5104 last Friday following some risk off flows into the weekend. This is where we can expect the buyers to step in to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price breaking lower to target the next support at 5057.
S&P 500 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the recent price action might have formed what looks like a bullish flag, although the price will need to break out to the upside to confirm it. We can also see that from a risk management perspective, the sellers will have a much better risk to reward setup around the upper bound of the flag where they will also find the confluence of the previous strong resistance zone and the red 21 moving average. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and increase the bullish bets into a new all-time high.
S&P 500 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that besides the resistance and the moving average, the sellers will also find the 61.8% Fibonacci retracement level adding some extra confluence around the 5180 level. Given the news of de-escalation, we might indeed get some risk on flows today and push towards those levels.
Upcoming Events
This week is a bit empty on the data front with just two notable reports. Today we have the Retail Sales data while on Thursday we get the latest US Jobless Claims figures.
