What now after reaching fresh highs for US stocks?
What now after reaching fresh highs for US stocks?
Risk appetite was holding up well heading into Thursday’s open, with index futures showing a clear willingness to brush aside ongoing geopolitical noise and focus on the bigger macro picture. After the big rally, though, markets are starting to look a little overstretched in the short term which could trigger some mild profit taking.
But unless we see a major re-escalation in the Iran conflict, dip buyers will remain in control. With the US-Iran talks set to resume apparently, it is worth keeping a close eye on oil prices for any signs of progress or breakdown. If you’d said a couple of weeks ago that the Strait of Hormuz would still be effectively shut, Brent oil holding above $95, and yet the S&P 500 would be charging to fresh all-time highs within days, it would’ve sounded far-fetched. But that’s exactly how things have played out.
S&P breaks 7K barrier on solid earnings and peace hopes
Despite lingering tensions in the Middle East, investors appear comfortable leaning into risk, favouring equities and higher-yielding assets over the safety of the dollar. Markets are pricing in a lasting peace deal, and are thus looking past the current situation. Rightly or wrongly, remains to be seen. This morning saw S&P 500 futures push a bit more higher after a record close above the 7,000 level, signalling continued confidence in the growth outlook, while Nasdaq 100 futures found additional support from upbeat signals out of Taiwan Semiconductor Manufacturing Company. At the same time, demand for pro-growth and emerging market currencies has picked up, reinforcing the softer dollar narrative. Unless tensions around Iran materially escalate and trigger a sharp spike in oil prices, the current backdrop suggests a steady grind higher in risk assets.
S&P technical analysis
Following the strong rally that pushed the S&P 500 to fresh all-time highs, momentum indicators are starting to look a little stretched to the upside, which could trigger some profit-taking in the days ahead. That said, there’s no doubt that the overall trend remains firmly bullish.
This suggests that after a period of consolidation—or even a modest pullback—we could see buyers step back in to keep the market elevated. From a bullish perspective, that’s exactly what you want to see at this stage: a healthy pause.
A phase of consolidation would allow indicators such as the RSI to unwind from overbought levels. On the daily chart, the RSI is hovering around 70, firmly in overbought territory. However, on the weekly timeframe, the RSI is not yet at extreme levels, which suggests the market could still push higher and potentially deliver another strong weekly performance.
Of course, that outlook could change if geopolitical risks escalate—particularly if tensions in the Middle East flare up significantly. Assuming that doesn’t happen, the path of least resistance remains to the upside.
So, what are the key levels to watch on the S&P 500 futures?
With the index trading at record highs, there are no clear resistance levels overhead. Instead, traders should focus on psychological round numbers such as 7100 and 7200 as potential areas for profit-taking. Beyond that, Fibonacci extension levels come into play.
The 127.2% extension of the most recent decline—from the previous all-time high to the late-March low—comes in around 7230. Meanwhile, the 161.8% extension sits near 7469. These levels represent potential upside targets for the bulls.
On the downside, there are several key support levels to keep an eye on. The previous all-time high at 7043 is the first level of support, followed by the psychologically important 7000 mark.
Below that, the high of the large bullish candle formed on Monday comes in at 6928, with additional support at 6888.
A break below 6888 would start to shift the near-term outlook in a more bearish direction.
Looking further out, longer-term support is seen at the 200-day moving average, currently around 6710, followed by the base of the recent breakout zone between roughly 6650 and 6684. This area should act as a strong support zone on any deeper pullbacks. However, given the pace of the recent rally, a move back toward those levels would likely require a significant catalyst—such as a major re-escalation in Middle East tensions.
Trader | Analyst | TradingCandles.com
e: Fawad.Razaqzada@TradingCandles.com
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