The S&P 500 broad market index futures are
trading neutrally near the 5,976-point level, with the benchmark caught in a
zone of uncertainty. Hopes for de-escalation between Israel and Iran initially
lifted sentiment on Monday, but optimism quickly faded after U.S. President
Donald Trump left the G7 summit early and urged Tehran residents to evacuate,
while also calling a National Security Council meeting—typically a precursor to
military action. However, no definitive decision was announced.
Trump’s inconsistent messaging has sown
confusion in the markets. One moment, he warned of an imminent strike; the
next, he floated the idea of negotiations only to resume his threats shortly
after. This back-and-forth triggered a 1.9% drop in the S&P 500 to 5,915
points, nearly breaching support at 5,950. At the height of the uncertainty,
Iran signalled a willingness to make concessions on its nuclear programme, but
only if Israeli strikes ceased. This became clearer after behind-the-scenes
phone calls between U.S. and Iranian officials, which reportedly led to the
White House’s announcement that Trump would decide on possible military action
within two weeks—a development many interpret as a tentative step toward
de-escalation.
Despite this, the fragility of the situation
is evident, particularly in large investors' behaviour. Net inflows into the
SPDR S&P 500 ETF Trust (SPY) fell to $4.86 billion last week, down from
$7.13 billion after Friday’s Israeli strike. This week began with massive
outflows of $8.43 billion, with no data yet available for Thursday and Friday.
While some level of optimism persists, it seems unlikely to reverse the overall
negative sentiment for the week. Last week’s confident outlook for an upside
breakout above the 5,950–6,050 target zone has now turned into a cautious
wait-and-see approach.
Meanwhile, the Federal Reserve left interest
rates unchanged at 4.50% and maintained its dot plot projection, which still
suggests two rate cuts are possible in 2025. Fed Chair Jerome Powell continued
to emphasize inflationary risks, particularly those stemming from higher
tariffs—though he could just as well have cited the 24% rise in oil prices
since early June. Trump, as expected, criticized the Fed’s stance. Despite past
threats to fire Powell, the central bank chief now appears secure enough in his
position to speak candidly, a dynamic that does not necessarily comfort
investors.
Looking ahead, several key U.S. macroeconomic
reports are scheduled for next week. PMI data arrives Monday, GDP on Thursday,
and the Personal Consumption Expenditures (PCE) index on Friday. These will be
closely watched to assess how justified Powell’s inflation warnings really are.
Technically, the outlook for the S&P 500
remains unchanged. The index continues to trade within an uptrend channel,
having already hit the primary target zone of 5,950–6,050. Holding above 5,950
increases the odds of retesting 6,050 resistance. A confirmed breakout above
that level would open the way toward the extreme upside zone at 6,300–6,400.
However, if the index fails to hold 5,950, a decline toward 5,840–5,860 could
follow, possibly flipping the trend to bearish.
Oil markets remain on edge. Brent crude
recently broke above resistance at $67.00–69.00 and surged toward the next key
zone at $76.00–78.00 before retreating slightly. A fresh attempt to break
higher is underway. If successful, this would set the stage for a move to
$86.00–88.00. However, such an advance would likely require renewed escalation
in the Middle East, such as direct U.S. involvement in the conflict. For now,
developments appear to be in a temporary holding phase.
Gold prices are also correcting. The
geopolitical risk premium has faded for now, with prices failing to break
through resistance at $3,430–3,450 per troy ounce and falling back to the
$3,330–3,350 support zone. Gold currently trades around $3,355. A close below
$3,330 would confirm further weakness, aligning with a broader baseline
scenario that still targets a decline to $3,030–3,050.
In currency markets, the U.S. Dollar remains
volatile but directionless. The EURUSD pair continues to trade within its
primary uptrend range of 1.14500–1.15500. During the height of Middle East
tensions, the pair tested the lower bound of this range, but has since bounced
back toward the top as the situation has calmed. This wide sideways trading
pattern suggests that traders should wait for a decisive breakout in either
direction before taking new positions.