A Volatile Holiday-Shortened Week With a Lot to Unpack
Stocks logged modest weekly gains in a volatile, holiday-shortened period, heavily shaped by a hawkish Federal Reserve decision and easing geopolitical tensions in the Middle East. Of the major indexes, the Nasdaq Composite performed best, advancing 2.43%, followed by the Russell 2000 and S&P 500 indexes, which added 1.21% and 0.93%, respectively. The Russell 2000 Index is now up 19% year to date.
Oil Crashes on the U.S.-Iran Peace Deal
Crude oil tumbled nearly 40% from its conflict peak, dropping to its lowest levels since March. The sharp decline was triggered by a U.S.-Iran peace deal that effectively reopens shipping through the Strait of Hormuz and restores massive energy supply to the market.
Gold and Crypto Navigate Mixed Signals
Gold saw turbulence, initially dropping on eased geopolitical concerns before finding temporary support as lower oil prices subdued broader inflation expectations. Cryptocurrencies experienced mild volatility, with Bitcoin generally range-bound. Prices slipped mid-week in response to the Fed’s hawkish posturing and broader market risk-off behavior, though risk assets attempted to stabilize late in the week.
Volatility Swings Sharply Before Settling
An indicator that tracks investors’ expectations of short-term U.S. stock market volatility traded in a wide range, reflecting shifts in the outlook for the Middle East conflict. On Wednesday the Cboe Volatility Index closed at the highest level since April 7. By Friday’s close, however, the VIX was trading nearly 18% below the previous week’s closing level.
The Fed Takes a Hawkish Turn
The FOMC held the federal funds rate steady but took a decidedly more hawkish tone. Updated economic projections removed the previously anticipated rate cuts and showed about half of policymakers leaning toward at least one rate hike later this year. This is a meaningful shift in the policy backdrop that traders need to factor into their positioning.
Key SPX Technical Levels to Watch
SPX support sits near 7,385-7,400, 7,250-60, and 7,020-30. Key chart resistance levels appear near 7,575 and 7,620.
In any case, as we always do at TheTechTrader.com, we will “Trade What We See, Not What We Think.”
HARRY BOXER, THE TECHNICAL TRADER
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