Selling S&P 500 with 7,300 target amid inflation shock and overheated market conditions

The S&P 500 Index (SPX) hit another historical high of 7,465.2 on Thursday morning. Such a surge was primarily driven by active buying during US President Donald Trump’s visit to Beijing to meet with Chinese leader Xi Jinping. 

However, whether this rally has long legs remains an open question. Positive geopolitical dynamics have already been priced in by investors. NVIDIA and Tesla stocks soared before the summit's outcomes were known. Although some progress is expected in key sectors such as trading, the rare-earth metal industry, and semiconductors, it will likely fall short of market expectations. At the same time, any signs of misunderstanding between the US and Chinese leaders could pour cold water on investors’ optimism.

Another factor to consider is the hotter-than-expected US inflation data. In April, the Consumer Price Index (CPI) jumped to 3.8% on an annual basis, while the Producer Price Index (PPI) skyrocketed to 6.00%, marking record growth in four years. These reports basically rule out the probability of policy easing by the Federal Reserve (Fed) in 2026. Moreover, the American regulator could consider rate hikes, and some market participants start to factor in this outlook. Under these circumstances, even robust quarterly earnings reports cannot offset the decline in valuation multiples caused by rising capital costs.

Meanwhile, the technical setup points to strong bullish momentum. The S&P 500 Index continues to climb, conquering one peak after another within the upper part of the channel. Bollinger Bands are expanding and drifting higher, confirming this trend. Prices are now approaching the ceiling at 7,468, signaling high volatility and solid momentum. However, the Chaikin Oscillator is trading lower today—a potential sign of a temporary drop in buying pressure and looming profit-taking after such an impressive rally.

Try out the trading plan presented below:

Sell SPX at the current price (7,450). Place Take profit at 7,300. Set Stop loss at 7,500.

The forecast is valid from May 14 till May 21, 2026.