U.S. Stocks Lag Amid Iran Fallout
Shain Vernier • 2 min read
It has been a modest session for U.S. stocks, with the three leading indices trading mixed. Through the first half of the trading day, the DJIA DOW (-45), S&P 500 SPX (-2), and NASDAQ (+10) are seeing muted participation. This phenomenon is a bit counterintuitive, in that most institutional traders are back at their desks following the holiday break. For the time being, it appears as though growing tensions in the Middle East are prompting investors to take a wait-and-see stance before assuming more risk in the equities markets.
On the debt front, short-term U.S. Treasuries are holding relatively firm. Here is the result of today’s 3 and 6-Month T-Bill auctions:
Event Previous Actual
3-Month T-Bill Auction 1.52% 1.52%
6-Month T-Bill Auction 1.52% 1.56%
U.S. Stocks Falter, Index Futures Rally
This morning’s trade of March E-mini S&P 500 futures has been interesting. Typically, we see a positive correlation between the S&P 500 index and E-mini S&P 500 futures. This hasn’t been the case today; the March E-mini S&Ps are rallying while the actual S&P 500 index is in the red.
Here are the levels to watch in the March E-mini S&Ps:
- Resistance(1): All-Time High, 3263.50
- Support(1): Bollinger MP, 3193.00
- Support(2): 38% Current Wave, 3190.00
Bottom Line: For the time being, an expected retaliation from Iran against U.S. interests is driving sentiment in the equities markets. Although such an event is likely to be minor in the long-term scheme of things, equities players are hesitant to boost risk exposure in the short-term. However, the gains in the March E-mini S&Ps are a strong indication of the strong positive sentiment toward U.S. stocks.
If we see a pullback from current levels, a long trade in the March E-mini S&Ps will set up. As long as the All-Time High (3263.50) remains intact, I will have buy orders in queue from 3193.25. With an initial stop at 3174.50, this trade produces 75 ticks on a standard 1:1 risk vs reward management plan.