US500 - Record Highs Built on a Deal That Has Not Happened Yet

The S&P 500 trades around 7,728 today. Earlier this week it set a record close above 7,700 for the first time, and the Dow finished at a record too. Two forces pushed the market there.

The first is earnings. Companies are reporting strong results. Palantir jumped 29% in a single session, and AMD beat expectations on both revenue and profit.

The second is oil. Prices fell sharply this week on hopes that the Strait of Hormuz will reopen. Cheaper oil helps in two ways: it lowers costs for companies, and it cools inflation, which reduces pressure on the Fed to raise rates.

So where is the risk? The deal has not actually been signed. President Trump said it could arrive as early as Wednesday. It did not. Sources told Reuters that important details remain unresolved, and that Iran wants control over ships entering the strait. On Wednesday, Houthi forces claimed an attack on a Saudi tanker, and Brent moved back toward $80.

Notice what the chart is already saying. The rally stopped as soon as the deal failed to appear, and the index has spent two days moving sideways instead of climbing.

This is the key point for traders. The good news is already in the price. If the deal is signed, much of that gain has been taken. If talks fail again, there is more room to fall than to rise.

Tomorrow adds the second test. The US jobs report is released, and Wall Street already expects at least one Fed rate hike before the end of the year. A strong number would bring that fear back quickly. A weak one would ease it, but raise questions about growth.

US500 key levels:

• Resistance: 7,790, then 7,850
• Support: 7,700, then 7,620

Watching: whether the Hormuz deal is actually signed, tomorrow's US jobs report, oil prices and Red Sea shipping attacks.

By Born2trade market research department

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