Selling SPX due to negative impact of trade wars

On Monday morning, the S&P 500 index continues its decline that began on January 31. On Monday, the opening price was 5958.2, down 2.5% from Sunday. Only consumer discretionary (+0.09%) and communication services (+0.74%) showed growth among all sectors of the US economy. The most serious decline was seen in the energy sector (-2.74%), where the drop in oil prices had a negative impact on stocks of companies in the industry.

US stocks fell after Donald Trump applied 25% tariffs on imports of goods from Mexico and Canada, as well as 10% on China. Other states have also indicated their readiness to retaliate. This creates additional uncertainty in the economic situation and affects the markets.

The tariffs will increase costs for US companies. Companies that depend on imports will face higher prices for raw material and components, which may have a negative impact on their profitability. Investors, predicting lower profits, begin to sell stocks. 

Retaliatory measures from Mexico, Canada and China could make things worse, causing a chain reaction in international trade. If other countries start imposing tariffs on US goods, it may lead to a decrease in exports, which would have a negative impact on US manufacturers and, consequently, on stock indexes. News of a trade war can trigger panic selling as investors seek to minimize losses in the face of uncertainty. This can lead to a sharp drop in the index, even if the long-term consequences are not clear yet.

All this is happening despite positive information about the state of the US economy. The US labor market remains stable, with a decrease in jobless claims and an increase in real consumer spending. Last week, the Fed also held the interest rate unchanged at 4.25–4.50%. This decision reflects the Fed's cautious approach amid continued economic growth and a stable labor market.

Technical analysis shows a possible change of trend to a downtrend. MACD indicator shows signs of weakening of the uptrend and possible reversal. The RSI indicator is in the neutral zone and does not indicate overbought or oversold conditions. A decline in RSI after a rise may indicate a loss of momentum.

Current recommendation:

Sell at the current price. Take profit — 5891.0. Stop loss — 5989.0.