Market Slips on Geopolitical Tensions

Technical Stock Market Briefing for Day & Swing Traders
| By Harry Boxer, Technical Market Analyst

Market Slips on Geopolitical Tensions

U.S. stock indexes fell on Friday amid heightened anxiety in the Middle East, sending the market to a negative week overall. After recording gains the previous two weeks, the S&P 500 and the NASDAQ posted fractional weekly declines.

Smaller-cap indexes fared worst, with the S&P MidCap 400 and Russell 2000 indexes falling 1.46% and 1.49%, respectively, while the Dow Jones Industrial Average shed 1.32% and dropped back into negative territory for the year. The S&P 500 Index and Nasdaq Composite fell to a lesser extent and remained positive year-to-date.

Midweek Optimism Cut Short

Major indexes were broadly higher through Thursday, buoyed by some better-than-expected economic data releases as well as reports that trade talks between the U.S. and China had led to a preliminary agreement to ease recent trade tensions.

However, sentiment quickly turned negative on Friday morning on news that Israel had launched a series of airstrikes targeting Iran’s nuclear facilities and military leaders. The significant escalation in tensions sent oil prices surging, benefiting energy stocks, while the broader indexes fell sharply and gave back gains from earlier in the week.

Technical Picture and Key Indicators

The tech-heavy Nasdaq-100® (NDX) still trades well above its 200-day moving average. Now its 50-day moving average is beginning to catch up with the 200-day. If the 50-day crosses over the 200-day, that would likely be seen as a bullish technical sign. However, the Relative Strength Index (RSI) for the NDX is approaching recent highs at close to 68, suggesting it may be near what are commonly seen as overbought areas.

Commodities and Crypto React

The price of U.S. crude oil surged more than 7% on Friday to the highest level in four months. On Friday afternoon, oil was trading around $73 per barrel, up nearly 13% for the week.

The price of gold resumed its climb, rising to new highs that eclipsed earlier records set in late April and early May. Gold was trading around $3,450 per ounce on Friday afternoon, up from about $3,320 at the end of the previous week and $2,600 at the end of last year.

Overall, energy minerals, consumer durables, and health technology were the sectors that performed the best during the week, while commercial services, retail trade, and transportation lagged.

Crypto had a volatile week. Bitcoin surged on Monday, temporarily trading above $110,000, but spent the rest of the week pulling back, briefly dropping below $103,000. Bitcoin is now up 11% this year, but more than 1000% in the last five years!

The Cboe Volatility Index (VIX) rallied more than 10% following the attack on Iran after falling about 60% over the last two months. Futures trading at the Cboe suggests VIX could remain above the historic average of 20 through the rest of the year, possibly a warning of choppiness ahead.

*No credit card required