S&P 500 Index flashes a death cross as US-Iran war continues ahead of NFP data

The S&P 500 Index continued its strong downward trend last week as the Iran war continued, pushing crude oil and natural gas prices higher.

The SPX index fell to $6,368, its lowest level since August last year. It has fallen in the last five consecutive weeks.

S&P 500 Index in focus as Iran war takes new twist

The S&P 500 Index and other American indices like the Dow Jones and the Nasdaq 100 will be in the spotlight this week as the US-Iran war takes a new twist.

Yemen's Ansah Allah, popularly known as Houthis, entered the war on Friday by shooting rockets towards Israel.

The group has committed to continuing fighting in the coming weeks, meaning that it may make it hard for oil tankers to transit through the Red Sea.

At the same time, the United States has sent troops to the region, with the ultimate goal being the control of the Kharg Island and the Strait of Hormuz.

All these events mean that the war will continue in the foreseeable future, pushing energy prices substantially higher in the coming weeks. 

Already, data shows that Brent and the West Texas Intermediate (WTI) jumped to $112 and $100, up by over 100% from the lowest level this year.

A continuation of this war will lead to a lower S&P 500 Index.

US non-farm payrolls data 

The other key catalyst for the S&P 500 Index will be the upcoming US non-farm payrolls (NFP) data, which will come out on Friday this week.

Economists expect the upcoming report to show that the labor market likely rebounded in February after shedding thousands of jobs in the previous month.

The average estimate is that the economy created 60k jobs in March after losing 92k in the previous month. The unemployment rate is expected to move from 4.4% to 4.5%.

Still, the labor market has largely stalled in the past few months, a trend that may continue in the coming months as the war in Iran leads to substantial shivers in the economy.

Indeed, the expected increase will partly be because of healthcare payrolls by over 30,000 Kaiser Permanente employees, who ended their strike.

A weaker jobs report will be bullish for the stock market as it may put pressure on the Federal Reserve to cut interest rates. The challenge, however, is that the US is going through stagflation, which is characterized by high inflation and slow economic growth.

In addition to the labor market data, the S&P 500 Index will react to the upcoming manufacturing and services PMIs from the United States. Economists expect the data to show that these numbers dropped modestly in March as the Iran war pushed energy prices higher.

SPX Index technical analysis as death cross forms

S&P 500 index Index chart | Source: TradingView 

The daily timeframe chart shows that the S&P 500 Index has slumped in the past few weeks, moving from a high of $7,000 in February to the current $6,368. 

It has slumped below the 23.6% Fibonacci Retracement level. Also, the index has formed a death cross pattern as the 50-day and 200-day Weighted Moving Averages (WMA) have crossed each other.

The Average Directional Index (ADX) has jumped to 40, a sign that the downtrend is gaining momentum. It has moved below the Supertrend indicator.

Therefore, the index will continue falling, with the next key target to watch being the 38.2% retracement level at $6,130.