S&P500 Futures Analysis: Stock Market Momentum Holds Ahead of Open

S&P 500 Futures Hold Gains After Record Close as Oil and Iran Drive the Trade

June E-mini S&P 500 Index futures are edging higher early Thursday after another record close on Wall Street and the tone is still risk-on. The Iran peace headlines that hit Wednesday afternoon sent crude oil sharply lower and stocks took off. I’ve watched this trade enough times to know exactly what it means. Lower oil pulls inflation pressure out of the market fast and traders start leaning back into growth.

What Happened Wednesday

The S&P 500 gained 1.46% and closed at a record high. The Nasdaq Composite jumped more than 2% and also closed at a record. The Dow added more than 600 points. Axios reported that White House officials believe they are close to a one-page memorandum of understanding with Iran that could end the war and establish a framework for future talks. Crude oil lost its footing immediately. Then President Trump warned that military strikes could resume if Iran rejects the proposal and stocks backed off their highs. Buyers held control into the close anyway. That reaction told me traders still want to buy this market.

The Rotation Was Obvious

Energy got hit and I watched the money move in real time. Spot Brent crude and West Texas Intermediate crude oil sold off hard on the Iran headlines and energy stocks went with them. Utilities dropped too. The buying landed in technology, communication services, and industrials. Nine of the 11 major S&P 500 sectors finished green. That is not a defensive rally. That is a risk-on session.

Semiconductor shares stayed active and that surprised me a little. Arm Holdings dropped 7% after guidance disappointed and the stock still couldn’t drag the sector down. The company beat quarterly estimates and the market punished it anyway. That tells you exactly where the bar is right now. Beat the number and issue aggressive growth guidance or traders will take it from you. Anything less than that gets sold.

Stocks Moving Ahead of the Opening

Fortinet is up 17% in premarket trading after raising its full-year billings outlook. DoorDash is jumping 12% after issuing strong second-quarter order guidance. Whirlpool is down 16% after cutting full-year guidance. Fastly is getting hit hard, off 25%, after a weak outlook disappointed traders.

Technical Outlook

June E-mini S&P 500 Index futures reaffirmed its uptrend early Thursday, taking out yesterday’s high at 7,395.75 to reach 7,410.50.

Pivot price support has moved up to 7,305.00, 7,271.00, 7,245.00 and 7,088.75. The minor swing bottoms are at 7,199.50, 7,131.25 and 7,079.25.

If we judge the strength of the market by its swing bottoms, then we would conclude that this rally, which began on March 31, is powerful. Since that date, we’ve seen five swing bottoms and all of them have been minor or one-day setbacks.

I’m not recommending trying to pick a top, but I am emphasizing pattern watching. I’ve been tracking the predictions of a crash or a correction on social media and I’m seeing traders feed the bull by selling rallies because of high RSI readings, but none of that is working right now. I believe the best sign of a top will be a break in the pattern. It could be a closing price reversal top, a two-day top or the failure of a swing bottom, but something will eventually tip us off that momentum is shifting.

As far as the crash predictors are concerned, study your history. In 1987, for example, the S&P 500 topped on August 25 and it didn’t crash until October 19.

What to Watch

McDonald’s, Shake Shack, Planet Fitness, Datadog, and Peloton all report before the opening bell. Jobless claims, productivity data, unit labor costs, and consumer credit numbers are also on the calendar. But oil is still the bigger story for stocks right now. If crude keeps breaking lower and the market starts believing the Iran war is winding down, traders are going to keep pulling money out of defensive energy positions and pushing it back into growth. That is what Wednesday looked like. The bulls still have control and the pivot support levels are where I’d watch for any sign that changes.

More Information in our Economic Calendar.