LIVE MARKETS-Low volatility, high stakes: S&P 500 faces pivotal week

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LOW VOLATILITY, HIGH STAKES: S&P 500 FACES PIVOTAL WEEK

Wall Street stock futures are higher on Monday after the U.S. and Iran announced a pause in hostilities over the weekend, sending oil prices sharply lower. The move comes ahead of a packed week featuring corporate earnings, key economic data and the Federal Open Market Committee policy decision on Wednesday.

Ahead of the open, E-mini S&P 500 futures Esc1 are up nearly 1%, pointing to a strong start for the benchmark index.

Even so, the S&P 500 index .SPX has gone essentially nowhere in recent months. Friday's close at 7,411.98 was little changed from its 7,412.84 finish on May 11 and left the index 2.6% below its June 2 record close of 7,609.78.

The prolonged sideways trading has also crushed volatility. The S&P 500's daily Bollinger Bandwidth ended Friday at its lowest level since March 5, signaling unusually compressed price action. While that doesn't indicate direction, it often precedes a larger move.

A reminder came after March 5, when the index dropped as much as 7.5% over the following 17 trading sessions. With several major catalysts on tap this week, traders are bracing for another significant move.

Based on futures gains, the S&P 500 is set to test resistance at its 20-day moving average near 7,490. A close above that level could signal an upside breakout and put fresh record highs, and potentially the 8,000 mark, back into focus.

On the downside, a break below the July 26 low of 7,376 could revive selling pressure. Support sits at 7,294.18 and 7,237.85, while the 7,000 area — reinforced by the rising 200-day moving average just above it — could act as a magnet for prices.

(Terence Gabriel)

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EARLIER ON LIVE MARKETS:

HALF-TIME IN EUROPE: STOXX CLOSING IN ON A 1% RISE CLICK HERE

WHY EUROPE IS FERTILE GROUND FOR ACTIVIST INVESTORS CLICK HERE

LOW INFLATION BETS GIVE DOLLAR UNEXPECTED BUT FRAGILE SUPPORT CLICK HERE

STOXX UP IN BROAD-BASED RALLY, ENERGY DRAGS CLICK HERE

BEFORE THE BELL: EUROPE RISES INTO BUSIEST EARNINGS WEEK AS OIL TUMBLES CLICK HERE

MARKETS DARE TO HOPE AS US, IRAN PUT WAR ON HOLD CLICK HERE

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)