Technical Analysis

S&P 500 Technical Outlook Amid Iran-Israel Tensions

The S&P 500 experienced a sell-off towards the end of last week’s trading session, largely due to concerns over imminent Iranian retaliation against Israel. However, over the weekend, Iran launched an operation against Israel, but most of the attacks were intercepted without any casualties. Following this, Iran concluded the operation, and the US informed Israel that it would not support retaliation, potentially leading to positive risk sentiment and a gap-up opening for the S&P 500.

Daily Chart Analysis:

The daily chart of the S&P 500 shows a bearish divergence with the MACD indicator, indicating weakening momentum and the potential for a pullback or reversal. The price has broken below the trendline and the 21-day moving average, opening the door for a more significant correction towards the 4713 level. The first key support is at 5104, where buyers are expected to step in and potentially drive a rally to new all-time highs. If the price breaks below this level, sellers will target the next support at 5057.

Trade Opportunities

Short Position:

  • Entry near the break of the trendline around 5250, which is now acting as a potential resistance, may offer an opportunity for traders expecting a continuation of the bearish momentum.
  • Stop Loss could be placed above the recent swing high or above the trendline to mitigate risk.
  • The first profit target is placed at 5104, followed by the subsequent support at 5057. If breached, the focus shifts to the more considerable correction level at 4713.

Long Position:

  • For traders looking for a bullish reversal, watch for price reactions at the 5104 support level. A confirmed bounce with significant volume and bullish price action may signal an entry point.
  • Stop Loss for long trades should be set just below 5104 to protect against a breakdown.
  • Profit targets could aim for a retest of the broken trendline and 21-day SMA or higher, towards the previous highs, contingent on a robust bullish reversal pattern.

Upcoming Events:

This week, the market will be closely watching two notable economic reports: Retail Sales data today and US Jobless Claims on Thursday. These reports could provide insights into the strength of the US economy and potentially influence the direction of the S&P 500.