S&P 500: US Indices Rally Today as Iran Ceasefire Optimism Sweeps the Market

Stocks Hold Gains at Mid-Session as Peace Talk Optimism Builds

The major U.S. stock indexes are holding on to earlier gains at the mid-session on Wednesday. The price action suggests investors are being influenced by a little bit of both fundamental events and technical chart patterns.

At 16:10 GMT, the blue chip Dow Jones Industrial Average is trading 46404.01, up 279.95 or +0.61%. The benchmark S&P 500 Index is at 6591.65, up 35.28 or +0.54% and the tech-weighted Nasdaq Composite is trading 21926.303, up 164.408 or +0.76%.

Two Peace Plans on the Table and Investors Are Buying It

In my opinion, the news is mixed today, but investors may have been looking for something positive so they could find an excuse to buy after a steep sell off. Today’s key events center on the war between the United States and Iran. On the positive side, the Associated Press (AP) is reporting that Iran has received a 15-point peace proposal from the U.S. This was according to an unnamed official in Islamabad. On the negative side, Iran state media said officials have rejected the U.S. ceasefire offer. Instead, Iran offered its own five-point proposal that includes maintaining control over the Strait of Hormuz.

Given today’s positive price response, I would say that optimism that there are two plans and hope that some way the two warring countries can find some kind of middle ground to stop the bombing and to bring stability to the region, is underpinning the market.

Investors Just Need a Little Clarity

As I’ve written several times in the past, all investors are looking for is clarity. When conditions are uncertain, it is very difficult to hedge away risk. With only a glimmer of clarity, professionals can find the risks they are exposed to and protect themselves.

Technical Outlook

From a technical perspective, the S&P 500 Index (SPX) is in a downtrend as determined by two metrics, the swing chart and the benchmark moving averages.

The swing chart is telling us that a sustained break under the last swing bottom at 6473.52 will signal a resumption of the downtrend. At this time, the market is in no position to change the main trend to up with the nearest main top at 6952.51.

The nearest minor top at 6651.62 is much closer. Taking out this level will not only change the minor trend to up, but it will shift momentum to the upside. This could fuel a near-term acceleration into 6754.30.

Moving average analysis points toward a bearish short-term and long-term formation. The long-term trend is being controlled by the 200-day MA at 6630.89. The 50-day MA at 6835.30 controls the short-term trend.

Overcoming the 200-day MA will be a sign of strength, but will it be strong enough to challenge the 50-day MA and overtake it with strong upside momentum, or will the market be capped by this indicator and trapped inside a range. Asking a market to overcome two major moving averages in a few days is asking too much so I anticipate a surge over the 200-day MA and then a rangebound trade.

More Information in our Economic Calendar.