S&P 500 Points to Lower Open On US-Iran Tensions Mount
Concerns about escalating tensions between the US and Iran seems to have rattled investors, with S&P500 futures pointing lower this Monday. The S&P500 is trading at 3225.4 as at the time of writing; off intraday highs of 3230.10 as the evolving escalations between the US and Iran took some new turns today. Iran is vowing retaliation over last week’s airstrikes that killed top Iranian commander General Qasem Soleimani and has indicated that it would no longer respect the limitations set on its uranium enrichment. The US is also talking tough, with US President Donald Trump tweeting that some of its newly acquired “two trillion dollars” of military equipment would be sent off Iran’s way “…and without hesitation” if any US interests were targeted. France and the UK have also sided with the US on the issue, creating investor panic.
Having hit all-time highs as 2019 signed off, the S&P 500 has traded in a muted manner, with price taking a retreat in the first trading days of the year. The escalating tensions mean that we may see some selling activity on the index, with the primary downside targets being at the 3141.5 and 3079.5 being the initial price target areas. These areas correspond to the 100% and the 78.6% Fibonacci retracement areas respectively. These areas are also previous resistance-turned-support areas.
Price is presently testing a support level at the 3220.2 area. This level is the 127.2% Fibonacci extension drawn from the swing low of June 4, 2019 to the swing high of September 12, 2019. Only a confirmed break of this price level to the downside will open up opportunities for the downside targets to come into focus.
On the flip side, rejection of the S&P 500 price action at this support level could provide a pivot for a retest of the previous high of 3261.13, which happens to the be the site of the 141.4% Fibonacci extension level.