S&P 500: Stock Market Weak Today As Oil Rallies, Uncertainty Builds

Stocks Pull Back as Iran War Enters Fourth Week

The major U.S. stock indexes are lower shortly after mid-session on Tuesday as some investors booked profits after yesterday’s sharp run-up. Perhaps fueling the move was a rebound in crude prices as the U.S. war with Iran moved into its fourth week.

At 17:34 GMT, the blue chip Dow Jones Industrial Average was down 63.97 or -0.14%. The benchmark S&P 500 Index was off by 0.39% and the tech-weighted Nasdaq Composite lost 0.93%.

Peace Talk Confusion Rattles Investors

On Monday, stocks rose, supported by comments from President Trump suggesting progress in talks with Iran. Conditions changed on Tuesday as investors questioned whether any talks were even taking place, let alone progressing. The tone today is a cautious one because of the mixed sentiment about the talks.

Investor confusion could be the issue behind today’s subdued trade and weakness. We have a situation where Trump cites progress in peace talks, and Iranian state media denies it. And to make matters even more tense for investors, the fighting between the U.S. and Iran continues. We’re looking at an unstable market that will be difficult to predict until clearer progress is made.

Oil Surges Back Above $100 and Energy Leads

Another factor weighing on the markets was a renewed surge in the oil market. International-benchmark Brent crude oil jumped more than 4%, moving back above $104 per barrel. U.S. benchmark WTI crude oil rose 5% to over $93. The strength in crude oil is making the energy sector the top performer in the S&P 500 for the day. As we approach the end of March, it should be noted that energy is the only sector up this month, rising more than 10%, while other sectors have struggled or declined.

The Risk List Keeps Growing

Looking ahead, several risks are making investors uneasy. Tensions in the Middle East remain high, Israel and Iran are continuing to exchange strikes on each other’s countries, and even the U.S. is considering sending about 3,000 troops to the region. These factors don’t make it sound like the peace process has begun.

I’ll remain bearish on the markets until I see proof that strategic talks between the U.S. and Iran are taking place. In the meantime, I’ll continue to monitor the price of oil since it will have a direct impact on inflation, growth and spending. In other words, all the events that drive corporate profits. I’m also going to start bracing for a possible escalation of the war if Trump decides to bomb Iranian power plants.

Technical Outlook

Technically, the S&P 500 Index’s (SPX) main trend is down according to the daily swing charts and the moving averages. A trade through 6473.52 will reaffirm the downtrend. A rally through 6651.62 will change the minor trend to up and shift momentum to the upside. However, it’s still going to take some work to change the main trend to up.

Swing chart analysis has pegged the retracement zone at 6566.52 to 6483.01 as the key support. Monday’s low at 6473.52 essentially tested the lower boundary successfully. This may have been the catalyst behind the intraday reversal, which drove prices back over the 50% level at 6566.52. Today, the index is retesting the retracement zone support, spending most of its time straddling the 50% pivot.

The other trend indicator is the 200-day moving average at 6628.03. Overcoming this indicator could launch a powerful breakout rally.

More Information in our S&P 500 Index’s (SPX).