US 500 Index – Still Exposed to Changing Headline RisksUS 500 IndexPEPPERSTONE:US500PepperstoneThe US 500 index continues to remain extremely sensitive to the tone of headlines related to the Iran conflict. For the first 3 days of this week traders responded with optimism to comments from the US administration that suggested a potential deescalation, ceasefire or even that an end to the war could be within sight. This saw the index climb 4.7% from 8-month lows at 6312 touched on Tuesday morning to a high of 6610 on Wednesday. An impressive rally indeed! However, a common feature of major geopolitical events is that sentiment can turn quickly from positive to negative, or vice versa, as the tone of a new headline or comment changes the market’s perception instantly. This is exactly what happened overnight as President Trump indicated in a 20-minute prime time address that while discussions are on-going, if a deal cannot be found, the US will hit Iran ‘extremely hard’ over the next two to three weeks, targeting energy infrastructure in the country (Reuters). Perhaps unsurprisingly, this shift in tone toward a potential escalation of the conflict moving into early April sent a new wave of panic through financial markets, leading the US 500 1.4% lower again to current levels around 6480 (0700 BST). Looking forward, while tomorrow there is a new US Non-farm Payrolls report scheduled for release at 1330 BST which could impact trader sentiment, the main driver for the direction of the US 500 into the weekend and the start of new week, could be the next wave of headlines on the Iran conflict. If President Trump is to be believed, talks between the US-Iran are continuing so there could be potential for a breakthrough leading to a possible ceasefire, while news of fresh attacks on Iranian power plants could also be a possibility, which may signal an escalation to the war and a more negative sentiment shift from traders. In these types of situations, remaining flexible and keeping position sizes manageable, while staying updated to new headline risks can be critical for traders. Maintaining an awareness of the current technical trend backdrop and potentially important support and resistance levels for the US 500 may also be helpful. Technical Update: Is the Latest Recovery Ending? It has been a volatile period for the US 500 index over the last couple of sessions. As the chart below shows, the sharp downside acceleration seen last Thursday and Friday, has been equally matched by a strong recovery developing on Tuesday and Wednesday this week. However, following President Trump’s comments last night, fresh selling pressure appears to be emerging again, In this uncertain and choppy environment, identifying potentially relevant support and resistance levels can be useful to gauge where the next directional price moves may develop from. Potential Resistance Levels: Following the rally seen so far this week, resistance levels are naturally the first area to focus on. As shown in the chart below, the latest sharp rebound has so far been capped by the 6606 level, which aligns with the declining Bollinger mid-average. It could be useful to monitor how this 6606 level is defended on a closing basis, especially given that it has already, so far at least, halted this week’s strong recovery. While a sustained close above 6606 may not guarantee further upside, it could open scope for a move toward 6663, which is the 50% Fibonacci retracement level. If the 6663 level, then gives way on a closing basis, an upside move could even extend toward 6746 which is the higher 61.8% level. Potential Support Levels: While the resistance level at 6606 continues to cap US 500 rallies, risks for renewed price declines remain. This is already seeing initial support at 6495, a level which is equal to the 38.2% retracement of this week’s range pressured as we write (0700 BST). Closing breaks below 6495 could suggest further price declines. A closing break below 6495 may shift focus toward the next support at 6460, which is the 50% retracement. Breaks below 6460, could potentially open moves toward 6425, which is the 61.8% level, and even toward 6312, the March 31st session low. The material provided here has not been prepared accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. 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