S&P500 and Nasdaq 100: US Stocks Forecast Hinges on CPI and Iran Risks

Futures Drop on U.S. Strikes Against Iran

S&P 500 futures fell 0.43% early Wednesday. Nasdaq 100 futures dropped 0.71%. Dow Jones Industrial Average futures lost 185 points, down 0.36%.

The United States launched strikes against Iran overnight. Officials called them self-defense after Iran reportedly downed a U.S. Army Apache helicopter over the Strait of Hormuz the day before. The ceasefire that was holding crude oil down on Tuesday is gone. West Texas Intermediate crude oil futures gained about 1% and traded near $89 a barrel.

The Consumer Price Index report lands at 12:30 GMT. Economists expect 4.2% annual inflation and 0.5% monthly. The market is walking into the most important data release of the week with a military escalation on top of it.

Daily June E-mini S&P 500 Index Technical Analysis

The main trend turned down according to the daily swing chart for the June E-mini S&P 500 Index on Tuesday when sellers took out 7354.25. The move drove the market into the 50-day moving average where it stopped at 7247.25 before rebounding. That type of price action suggests long liquidation. In other words, few professionals, if any, sold weakness, which was a risky play.

Given the new main range of 7632.25 to 7247.25, the key area to watch is 7439.75 to 7485.25. If new shorts come in on a test of this area then look for the formation of a potentially bearish secondary lower top. This could create another swing down, but this time, the 50-day MA at 7242.60 may not hold.

If the 50-day MA fails to attract buyers then look for an even steeper break into the support cluster formed by the retracement zone at 6992.75 to 6841.75 and the 200-day moving average at 6965.03.

All bets are off for a sharp break if buyers recapture 7485.25 with conviction.

Daily June E-mini Nasdaq-100 Index Technical Analysis

On Tuesday, the June E-mini Nasdaq-100 Index also changed the main trend to down on the swing chart when it took out the last swing bottom at 28663.00. The selling was fierce with traders driving the index to 28227.75 before bouncing higher into the close. This price action suggests the move was a little long-liquidation and short-selling.

Nonetheless, I don’t think the move is over with the 50-day moving average at 27918.72 just waiting to be tested as well as the major retracement zone at 26884.75 to 25958.75. The latter even forms a support cluster with the 200-day moving average at 26032.91.

I’m not too worried about the downside. I have my bearish bias but it will all depend on how traders respond to a 50% to 61.8% retracement of the break from 30807.75 to 28227.75. That key area is 29517.75 to 29822.25.

If this index is going to fulfill my objective of the 50-day moving average first, then the 200-day moving average, new shorts are going to have to come in to defend a breakout over 29517.75 to 29822.25. If they fail to do so then the odds of a new high over the near-term will increase significantly.

U.S. Strikes Change the Equation Overnight

President Donald Trump accused Iran of downing the Apache helicopter during patrol operations over the Strait of Hormuz. U.S. Central Command carried out the strikes in response. Iran has not accepted responsibility for the helicopter. That does not matter to the market right now. What matters is the ceasefire is over. Tuesday’s crude oil decline came on deal talk. Wednesday’s crude oil gain came on missiles. The Strait of Hormuz risk that the market was trying to price out is back in full.

The deal Trump said could come within “two or three days” is not coming Wednesday. The diplomatic track just got harder. Every barrel of crude oil that was priced on optimism Tuesday is getting repriced on escalation Wednesday. That hits inflation expectations directly. The Consumer Price Index report lands in a few hours. If it comes in hot on top of a military escalation, the Federal Reserve argument gets worse for equities.

Asia Sold Everything

South Korea’s Kospi dropped 4.52%. Japan’s Nikkei 225 fell 1.89%. China’s CSI 300 lost 1.11%. Australia’s S&P/ASX 200 declined 0.57%.

The selling was broad. Technology led the losses. SK Hynix dropped more than 8%. Samsung Electronics fell 7.45%. In Japan, SoftBank Group plunged 10% after reports that its effort to secure $6 billion through a margin loan backed by its OpenAI stake hit obstacles. Advantest lost 3.8%. Renesas Electronics lost 3.4%. Taiwan Semiconductor Manufacturing Company fell about 2%. Apple supplier Hon Hai Precision Industry dropped more than 4%.

The chip selloff is now global. U.S. semiconductor names started it Friday. Asia is carrying it Wednesday. The artificial intelligence trade is getting tested across every major market simultaneously.

CPI Decides Whether the Selling Accelerates

The May Consumer Price Index report is due at 12:30 GMT. Economists surveyed by Dow Jones expect annual inflation at 4.2%. Monthly prices expected up 0.5%. If those numbers land, it marks the first time annual Consumer Price Index inflation has topped 4% since May 2023. Highest reading since April of that year.

A hot print on top of a military escalation is the worst combination for equities. Inflation running above 4% keeps the Federal Reserve locked in place. Crude oil rising on strikes adds energy cost pressure on top of it. A soft print gives the market something to hold onto. Rate cut expectations come back. The dollar softens. Growth stocks get room to bounce. Everything Wednesday depends on that 12:30 GMT release.

What to Watch

The strikes against Iran and the Consumer Price Index report are the only two things that matter Wednesday. Both the S&P 500 and Nasdaq changed trend to down on Tuesday.

he June E-mini S&P 500 Index needs to recapture 7485.25 to shift momentum back to the upside. The June E-mini Nasdaq-100 Index has its key zone at 29517.75 to 29822.25. New shorts defending those zones create secondary lower tops. That opens the door to the 50-day moving averages and eventually the 200-day.

Asia already sold hard. Crude oil is rising on the strikes. The Consumer Price Index decides whether the Federal Reserve argument gets worse from here.

The way I see it, a hot Consumer Price Index print with crude oil rising on military escalation puts both indexes on a path toward their 50-day moving averages. S&P 500 at 7242.60. Nasdaq at 27918.72.

A soft Consumer Price Index print is the only thing that can slow the selling down. The strikes changed the setup overnight. The data decides the direction from here.

More Information in our Economic Calendar.