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12.08.202610:29 Forex Analysis & Reviews: Stock market sleeps with one eye open

Relevancia 04:00 2026-08-17 UTC--4

Silence is also an answer, and for a second consecutive session, US investors are experiencing this firsthand. Major USindices are declining, while oil, by contrast, is climbing: Brent approached $90 per barrel after Iran confirmed its intention to keep the Strait of Hormuz closed until its demands are met.

S&P 500 and oil dynamics

Exchange Rates 12.08.2026 analysis

The market is clearly disappointed. A week ago, it reacted enthusiastically to promises of a swift deal on the strait, but no progress has materialized. Pakistan briefly raised investor hopes with optimism over a settlement, but Tehran quickly cooled that sentiment. Add to this the uncertainty surrounding the Fed's next steps and the ongoing US-Iran standoff – and you get a market that, as wits have aptly observed, resembles a sandbox: here, one sleeps with one eye open and holds the pillow tightly.

However, not everything is unambiguously gloomy. Corporate earnings continue to surpass expectations and remain at record levels, while equity positioning remains surprisingly restrained. According to the American Association of Individual Investors, bears have outnumbered bulls for 20 of the last 25 weeks, a ratio last seen following Donald Trump's imposition of global tariffs. Such unanimity among skeptics has in the past often preceded continued rallies rather than their end – healthy cautiousness after a 22% rise in the S&P 500 since late March.

US inflation dynamics

Exchange Rates 12.08.2026 analysis

The main test, however, lies ahead. Wednesday brings the July CPI report. The market expects a 0.1% rise following a 0.4% decline the previous month. Bloomberg economists suggest core inflation may drop to its lowest since March 2021. Montis Financial expects the report to continue the downward trend and strengthen the case for a rate pause rather than a hike, especially given the weak US labor market data.

Interactive Brokers warns that macro data alone may not be enough. The equity rally will only continue if there is tangible progress on unblocking the Strait of Hormuz.

In effect, the market is now balancing between strong corporate fundamentals and rising profits on one side, and geopolitical uncertainty and a divided Fed on the other. Risks appear roughly balanced, while the specter of rate hikes and military escalation in the Middle East has not disappeared.

Exchange Rates 12.08.2026 analysis

Will the inflation report be able to outweigh the anxiety over the Strait of Hormuz?

Technically, on the daily chart, the S&P 500 index has tested the important pivot level of 7,730. Success for bears in this endeavor would provide a basis for selling, as it would increase the risks of activating a 1-2-3 reversal pattern. Conversely, a bounce off the key support level would allow adding to previously established long positions.

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

Marek Petkovich,
Analytical expert of InstaSpot
© 2007-2026
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