Political jitters drive S&P 500 into short-term correction

The S&P 500 Index (SPX) opened this week on a cautious note, weighed down by the rapidly escalating public clash between the Trump administration and the US central bank. Over the weekend, Federal Reserve (Fed) Chair Jerome Powell made a highly charged statement, revealing he had faced threats of criminal prosecution—a move the official described as an attempt to strong-arm the American regulator into cutting rates. Investor unease over the incident has triggered a flight from the dollar and a noticeable shift toward safe-haven assets.

Despite the political drama, underlying fundamentals remain supportive. Last week's jobs report pointed to softening hiring trends, though it still reflected a resilient labor market—a combination that firmed up expectations for further monetary easing in 2026.

In fact, attention now turns to corporate earnings from major banks and December's inflation report. A hotter-than-anticipated Сonsumer Price Index (CPI) reading would only intensify the Fed's tightrope walk between political headwinds and purchasing power risks. Nevertheless, even against this high-stakes backdrop, the market's risk appetite has yet to crack.

Technically, the charts support the case for short-term caution. After a strong start to the year, the SPX rally is showing its first signs of strain. Notably, the Stochastic Indicator, hovering in neutral, has formed a bearish crossover and turned lower. This shows that there is a great chance of a technical pullback. In the meantime, the Chaikin Oscillator—though still positive—has lost upward momentum during Monday's early trading, suggesting buyers are taking a breather for a while. 

Taken together, political friction, upcoming data releases, and overstretched momentum create an environment ripe for a market correction, which provides a strategic entry opportunity for investors.

Here's a trading plan you might consider:

Buy the S&P 500 Index at around $6,895 when the correction comes into play. Place Take Profit at $6,980. Set Stop Loss at $6,840.

This forecast is valid between January 12 and January 19, 2026.