The S&P 500 is Dancing on a Volcano
Economic Announcements:
- 4:00 PM: ISM Non-Manufacturing PMI
Corporate Earnings:
- N/A
S&P 500 Analysis:
VPOC: 6604.25
VVA: 6600 – 6616
High-Low: 6598.25-6639
PP: 6615
Open: 6590 (Zone 3)
Vix: 24.73
On Friday, global stock exchanges were closed for Good Friday. Markets were still open for part of the day with an early close.
Unsurprisingly, we did not see major movements, with the S&P 500 remaining in the 6600-6620 support zone. However, employment data (NFP) was released, causing a large wick on the 2:30 PM candle without changing the price direction. The index closed at 6604.
This morning, the S&P 500 opened in Zone 3 at 6590 with a bearish gap. This gap was quickly filled, and the price tested Thursday’s VVAH, where it met resistance. During its ascent, the index created a single print between 6590 and 6601. Hopes of a ceasefire in Iran drove the price up, even if a resolution currently seems unlikely. The price direction is likely to vary greatly depending on the progress of negotiations, as Trump’s ultimatum is approaching, although he has extended the deadline until Tuesday.
Regarding options, we have large put levels at 6500, 6550, and 6600, and call levels at 6600, 6800, and 7000.
Today, we will have the non-manufacturing PMI data at 4:00 PM.
Scenario 1 🟡: Upon rejection at Friday’s high of 6639, the price could consolidate in Friday’s value area at 6600.
Scenario 2 🟢: Upon breaking Friday’s high of 6639 and confirmation by breaking the resistance zone of 6650-6655, the price could move higher and target the resistance zone of 6690-6710.
Scenario 3 🔴: Upon breaking Friday’s low of 6598 and confirmation by breaking the open at 6590, the price could target the support zone of 6500-6520.
Key Levels:
- 6820-6840 (Resistance Zone)
- 6760-6780 (Resistance Zone)
- 6690-6710 (Resistance Zone)
- 6650-6655 (Resistance Zone)
- 6639 (Friday’s High)
- 6600-6620 (Resistance Zone + VVA 6600-6616 + Vpoc 6604)
- 6590 (Open)
- 6500-6520 (Support Zone)
- 6455-6470 (Support Zone)
60-Second Clock
Market situation
- S&P 500 and Nasdaq: After a period of correction, the indices experienced a major technical rebound, driven by the unwinding of CTA selling positions. The S&P 500 tested the key support of 6,530 points, an area where buyers intervened.
- Holiday Closure: US equity and bond markets were closed this Friday, April 3, for Good Friday, leading to reduced liquidity in futures contracts.
Builder Sentiment
- Tesla: First-quarter deliveries disappointed the market with 358,000 vehicles, compared to 372,000 expected by analysts.
- Energy Production: Despite high prices, US oil producers do not anticipate a “dramatic” increase in production in the short term.
Upcoming Events
- Hormuz Ultimatum: Trump extends the deadline for Iran until Tuesday, openly threatening to destroy the power grid.
- Macro Agenda: The week will be marked by the ISM Services (Monday), FOMC minutes (Wednesday), and CPI inflation figures (Friday).
Market Volatility
- Oil: WTI crude jumped more than $11 to reach $111.38 following military tensions.
- VIX Index: The fear index retreated from 30 to 27 but remains at high levels, signaling persistent nervousness.
Impact of the Iran War
- Military Escalation: A US F-15E aircraft was shot down by Iranian forces. The United States threatens to strike Iran’s power grid and oil wells if the Strait of Hormuz is not reopened.
- Logistics: Traffic in the Strait of Hormuz collapsed, leading to estimated global production losses of 8 million barrels per day.
Currency Reaction
- US Dollar (USD): The greenback maintains its safe-haven status. It strengthens during escalation announcements and retreats slightly on hopes of diplomacy.
- Yen (JPY): The Japanese currency benefited from the temporary weakness of the dollar, although macroeconomic conditions in Japan do not prompt an immediate tightening by the BoJ.
Inflation Outlook
- Energy Threat: The Fed (Logan, Schmid) is concerned that the oil shock may not be transitory and could eventually spread to core inflation.
- Production Costs: The manufacturing ISM showed a surge in prices paid to 78.3, directly reflecting the impact of the conflict on transportation and energy costs.
Macro
The US Labor Market (NFP), The Spectacular Rebound
Employment explodes upwards, but wage inflation slows.
Non-Farm Payrolls (NFP):
- Current: 178 K
- Forecast: 60 K
- Previous: -133 K
Unemployment Rate:
- Actual: 4.3%
- Forecast: 4.4%
- Previous: 4.4%
Average Hourly Earnings – Monthly:
- Current: 0.2%
- Forecast: 0.3%
- Previous: 0.4%
-> Observation: This is a huge positive surprise. While the market feared the worst after last month’s catastrophic figure, NFP job creations shattered expectations, massively driven by the private sector. The unemployment rate even dropped to 4.3%. The crucial detail lies in wages: despite these massive hirings, the increase in hourly earnings is slowing.
Summary
- The American Economy Sweeps Away Recession: The labor market proves exceptional resilience. Private companies are hiring at a rapid pace, demonstrating that the main economic engine of the United States is in perfect health.
- Impact for the FED: This is a neither too hot nor too cold scenario. The economy is creating many jobs, but since wages are increasing less rapidly, the risk of reigniting inflation is averted. The Fed is not obliged to raise its rates, nor does it have an urgent need to drastically lower them to save employment.
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