S&P500: Support Holds, Volatility Eases and Stocks Rise as Oil Slips

Stocks Mixed as Volatility Takes a Breather and Iran War Dominates

The major U.S. stock index futures are putting in a mixed to better pre-opening performance on Wednesday as volatility takes a breather after trading at elevated levels the past two sessions. Traders are also assessing key jobs data from ADP and watching for new developments in the war with Iran.

Headline Driven Market with Fed Policy in the Crosshairs

Currently, we’re in a headline driven market with investors primarily focusing on news that could potentially impact the U.S. economy and future Fed monetary policy decisions. One of the main issues investors are dealing with is the lack of proof that the battle between the United States and Iran will be a short-term event. At this time, I don’t see any signs of de-escalation and at times, I see it actually intensifying. If the theater continues to widen into other Arab countries, the oil market could be jammed up for a long time, raising inflationary fears, which would not be good for those betting on a Fed rate cut like stock market investors.

Watch Treasury Yields and the FedWatch Tool for Direction

Continue to monitor Treasury yields because they are going to telegraph what the financial community really thinks the Fed’s next move will be. Also, look at the CME’s FedWatch tool, which is now leaning toward the Fed holding rates steady in June. The chances of a rate hike have also risen, but it’s still far from certainty. I think these are the known unknowns that the market wasn’t anticipating and are the primary sources of the volatility.

Stocks Are Mirroring Crude Oil — Watch the Strait

The other thing I’ve noticed is that the U.S. stock market is mirroring the movement in crude oil. Crude oil is weakening today after Treasury Secretary Scott Bessent pledged support for oil tankers navigating through the Strait of Hormuz. The news is seen as supportive for stock prices.

Key Support at 6813.00 to 6758.75 — 50-Day MA the Last Barrier

Technically, March E-mini S&P 500 Index futures are edging higher after reversing earlier weakness. Even though it traded as low as 6718.75 on Tuesday, I think the key support is the three-month retracement zone at 6813.00 to 6758.75. If this area holds today, it could create the upside momentum needed to rally into the short-term retracement zone at 6881.00 to 6919.25. This is the last potential barrier before the 50-day moving average at 6934.00.

Oil Down, Stocks Up — Three Goals for the Week

Today’s price action tells us a lot about what is really most important to the stock market, the price of oil. Essentially, we’re in an oil down, stock market up situation. If the White House expands its plans to protect oil shipments in the region then stocks are likely to move higher.

Stock market investors have three main goals this week, establish support, turn higher for the week by recapturing Friday’s close at 6888.25 and overcome the 50-day moving average at 6933.91.

More Information in our Economic Calendar.