Cautious Optimism in Stocks On Iran Peace-Deal Hopes
Iran Headlines Remain Key
Markets remain highly headline driven midweek as traders continue to react to conflicting signals on the Middle East conflict. Stocks are tentatively higher today on news that the US has submitted a 15-point peace plan to Iran to be discussed at high level talks due to take place in Pakistan today. Additionally, there are reports that Iran is allowing “non enemy linked” ships to pass through the Strait of Hormuz (partial reopening). As such, there is a more optimistic feel today, though traders remain cautious given the high risk that talks either don’t take place or fail immediately. There is also still some scepticism about how engaged the two sides are after Iranian military chiefs continued to insist that no dialogue was taking place.
High Volatility Risks
For now, traders will wait and see whether the proposed talks in Pakistan take place. If news breaks that talks are underway, risk assets are likely to rally further near-term. Similarly, if we get news that talks are not happening, risk assets are vulnerable to a sharp drop lower. Along with the elevated economic threat as a result of elevated energy prices stemming from the conflict, stocks are also at risk from a more hawkish Fed outlook amidst increased inflationary pressures. Money markets are now pricing out any Fed easing this year, despite the Fed itself still projecting a cut. If the Fed’s forecasts turn more in line with the markets’, this could create further headwinds for stocks near-term.
Technical Views
ES (Mini S&P Futures)
For now, the market remains above the 6,505.16-6,587.60-support area having probed below on Monday. While this region holds, focus is on a fresh push higher in line with the broader bull trend. If we break below there, however, focus turns to deeper support at the 6,243.21-level next, in line with bearish momentum studies readings.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.