At one point today, the SP500 index was up more than 1%, but sellers quickly returned and erased half of those gains. At the time of writing, the index traded 0.5% higher, getting ready for the US session.
Diplomatic Talks Giving Hope
The foreign ministers of the Russian Federation and Ukraine had agreed to meet in Turkey, with Sergey Lavrov and Dmitro Kuleba set to meet later in the week on the sidelines of the Antalya Diplomacy Forum.
Turkish foreign minister Mevlut Cavusoglu said on Twitter that he hoped the step would lead to “peace and stability.” The meeting would mark the highest-level contact between the two sides since 24 February, when Moscow started the special military operation in Ukraine.
Traders have started selling equities recently as soaring commodities will rattle the global economy. Oil rose to 125 USD, while copper and nickel also rocketed higher. In addition, wheat jumped to new highs, leading to massive inflation worldwide.
At the same time, the Fed appears ready to start hiking rates, pushing the two-year US yield back to cycle highs near 1.6%. Even if the war conflict is resolved soon (hopefully), soaring inflation will prompt central banks to increase rates, further undermining US stock markets.
There are no significant macro data on schedule today. Thus, the focus of investors will remain purely on the developments in Ukraine.
Bear Market Spotted
So far, the SP500 index has managed to defend some significant supports, with the next being in the 4,150 USD zone. However, since January, the market has been posting lower highs and lower lows, a bear market sign.
In case of a bearish breakdown, we could see a quick decline to 4,000 USD. The market seems way oversold short-term. Therefore, any positive news from Ukraine could prompt a short-squeeze relief rally.
Alternatively, the index must rise above 4,275 USD to stabilize short-term, while medium-term stabilization could be achieved if the price increases above 4,400 USD.