Yesterday we saw a relief rally back to a resistance area. The primary driver is a potential de-escalation in the U.S.-Iran conflict. Following a volatile Monday where markets plunged, sentiment has shifted positively after President Donald Trump announced a five-day postponement of planned military strikes on Iranian energy infrastructure to allow for “productive conversations.” Brent crude prices plummeted roughly 10%, briefly dipping below $100 per barrel following the news of the strike postponement. This has significantly eased immediate inflation fears that were weighing on the broader market. However, renewed threats and geopolitical headlines have reversed some of that relief rally overnight.
Based on the wave count there should be some bad news at the end of the week. Markets appears to be in a sideways move which is the fourth wave, this move will probably end on Friday. After this move markets should decline to new lows (fifth wave) next week, therefore the situation in the Middle East looks set to escalate this weekend.