S&P500: SpaceX IPO and Iran Deal Set Stage for Market Volatility

Peace Deal and SpaceX Drive Futures Higher

The Iran story flipped overnight. Iranian state media reported that a draft agreement between the United States and Iran includes lifting oil sanctions in exchange for reopening the Strait of Hormuz. Bloomberg reported both countries could sign in Switzerland as early as Sunday. SpaceX is expected to debut on the Nasdaq Friday under the ticker SPCX.

At 12:51 GMT, S&P 500 futures are up 0.41%. Nasdaq 100 futures have gained 0.34%. Dow Jones Industrial Average futures have jumped 275 points, up 0.54%.

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

June E-mini S&P 500 Index futures are edging higher during Friday’s pre-market session. The main trend is down according to the daily swing chart. The short-term range is 7632.25 to 7232.25. The index is currently testing its 50% to 61.8% retracement zone at 7432.25 to 7479.50.

Trader reaction to 7432.25 to 7479.50 will set the tone on Friday. With the main trend down, trend traders will be looking to sell a rally into this zone. They are going to try to form a potentially bearish secondary lower top, which will then set in motion the next leg down.

Bullish counter-trend traders are going to try to cross to the strong side of this retracement zone. They are going to try to take a run at the record high.

Essentially, look for a weak tone on a sustained move under 7432.25 and a strong tone on a sustained move over 7479.50.

It looks like the key support is the 50-day moving average at 7273.00. It held three tests this week so traders recognize it and respect it. A failure to hold the 50-day MA and the swing bottom at 7232.25 will be a sign of weakness. It could also be the trigger point for an acceleration to the downside with the target a major retracement zone at 6992.75 to 6841.75. Inside this zone is the 200-day MA at 6972.30. It forms a support cluster with the 50% at 6992.75.

To recap, the set up is clear. Trader reaction to 7432.25 to 7479.50 will determine the direction of the index into the close on Friday.

Daily June E-mini Nasdaq-100 Index Futures Technical Analysis

June E-mini Nasdaq-100 Index futures are posting a similar pattern to the S&P 500 Index. Same strategy, different numbers.

The main trend is down according to the daily swing chart but we haven’t formed a formidable secondary lower top to call the index outright bearish.

The main range is 30807.75 to 28227.75. Its retracement zone at 29517.75 to 29822.25 is the key area to watch. The index will get stronger over 29822.25 with 30807.75 the major upside target. A sustained move under 29517.75 after this reversal will signal the presence of sellers. This could lead to the formation of a potentially bearish secondary lower top.

If it begins to sell off under 29517.75 then traders are likely to target the main bottom at 28227.75 and the 50-day moving average at 28126.89. Crossing to the weak side of the 50-day MA could trigger the start of a steep break into the long-term retracement zone at 26884.75 to 25958.75 with the 200-day MA sitting inside it at 26083.80.

Stocks in the News

Adobe fell 6.8% after the fiscal second-quarter operating margin missed expectations. Chief Financial Officer Dan Dunn is departing. The combination of a margin miss and a CFO exit on the same report is not a confidence builder.

AMD gained more than 1% after Citi upgraded the stock to buy. That upgrade matters after a week where every chip name was under pressure.

Lennar slipped 0.7% after revenue and home delivery figures came in below forecasts.

The Iran Deal Changes the Oil Equation

The draft agreement reported by Iranian state media would have the United States lifting oil sanctions in exchange for Iran reopening the Strait of Hormuz. Bloomberg said both countries could sign in Switzerland as early as Sunday. Thursday, Trump cancelled strikes after saying discussions had reached Iran’s highest leadership. Friday, the market is trading like a deal is close.

Crude oil is falling on the news. Lower oil prices are boosting travel stocks. United Airlines and Delta Air Lines are advancing. Carnival and Royal Caribbean are trading higher as lower fuel costs improve the outlook for the cruise operators. Energy stocks are going the other direction as the crude oil premium comes out.

If the deal holds, the supply picture that has been supporting crude oil for months starts to unwind. If it falls apart by Monday, the market goes back to pricing in disruption risk. This time the deal talk has a specific timeline and a location. Switzerland on Sunday. That separates it from every previous round.

SpaceX Is the Biggest IPO in History

The $75 billion raise is unprecedented and it is landing on a market that has already run hard. The Information Technology sector has climbed 37% since April compared with 17% for the S&P 500 over the same period. Large IPOs typically show up when confidence is this high. The question is what investors have to sell to participate.

Household exposure to equities is near record highs and some of these accounts need to liquidate existing positions to free up cash for a $75 billion allocation. Some of last week’s heavy chip selling may have been exactly this, money moving to the sideline ahead of SpaceX. The offering resolves that overhang one way or the other by the end of Friday.

Chasing a 37% sector run into the largest IPO in history is not the same trade it was six months ago. Rocket Lab is up more than 6% in the pre-market. Virgin Galactic, AST SpaceMobile, and Redwire are all higher ahead of the debut.

Rollover Season Adds Another Variable

The stock indexes are entering rollover season with contract expiration and repositioning typically increasing volatility. This cycle could be one of the biggest in history given the size of the positions built during the artificial intelligence rally. This rollover season has the main trend down on the swing chart, a potential Iran deal repricing crude oil, and the largest IPO ever pricing on the same day. Expect outsized moves in both directions.

What to Watch

The Iran deal is the dominant story Friday. A signing in Switzerland as early as Sunday would reopen the Strait of Hormuz and lift oil sanctions.

SpaceX pricing at $1.77 trillion is the largest IPO ever. The capital flows around that event create volatility regardless of where the broader market trades. Rollover season on top of it adds another layer of positioning risk.

The way I see it, the June E-mini S&P 500 Index futures are testing the 7432.25 to 7479.50 retracement zone right now. That zone decides the direction into the close. Above 7479.50 the bulls take a run at the record high. Below 7432.25 the sellers step in and the secondary lower top forms. The 50-day moving average at 7273.00 held three times this week. If it fails, the selling accelerates toward 6992.75 to 6841.75 where the 200-day moving average sits.

The Nasdaq 100 has its zone at 29517.75 to 29822.25. Same setup. Above it, 30807.75 comes back into play. Below it, the secondary lower top confirms and the 50-day at 28126.89 is the next target. Friday has more catalysts hitting at once than any single session this week. Trade accordingly.

More Information in our Economic Calendar.