Market Call: The Winds Of War

The S&P 500 is down 2.5% from its record high of 5254.35 on March 29 (chart). Its 1.5% drop on Friday was widely attributed to disappointing earnings reports from the big banks that day. Undoubtedly, the market also reacted to warnings from the White House that Iran would attack Israel within a couple of days, which happened Saturday afternoon EST. The S&P 500 found support at its 50-day moving average on Friday.

The S&P 500 stock market rally could stall for a while under the circumstances. On the negative side is the deteriorating geopolitical situation in both the Middle East and in Russia's war against Ukraine. In addition, investors may have to give up on expecting any rate cut this year. Technically, sentiment has been too bullish and 76.2% of the S&P 500 stock prices are trading above their 200-day moving average, which is a relatively high reading (chart).