US500 on the brink of major selloff?

The S&P500 has dropped as much as 2% since Monday.

WHY:

• Geopolitical risk: The Iran conflict has sparked a wave of risk aversion, souring appetite for riskier assets as investors rush to safe-haven destinations.

• Fears of rising inflation: Surging oil prices from the Middle East conflict have re-ignited global inflation fears – prompting investors to pare bets for Fed rate cuts.

Traders are pricing a less than 15% chance of a Fed cut by April with this jumping to 43% by June.

Note: Before the devastating events over the weekend, the odds of a Fed by June were around 65%.

WHAT COULD MOVE US500 THIS WEEK?

Friday 6th March: US February NFP report – 13:30 PM GMT

• The US economy is expected to have created 58,000 jobs in February compared to 130,000 in the previous month while the unemployment rate unchanged at 4.3%.

US500 is forecasted to move 0.9% up or 1.6% down in a 6-hour window after the US NFP report.

POTENTIAL SCENARIOS – 

BULLISH – A move back above 6800 may open a path toward the 100-day SMA, 50-day SMA and 6950.

BEARISH – Weakness below 6800 could see a decline toward 6715 and 6700.