SPX sellers can again lower prices to 5880 level

At the end of last week, market participants attempted to reverse the downward movement of the S&P 500 Index. Friday's 1.4% gain may seem like a strong rebound, but it did not even make up for the previous day's 1.8% decline. The first trading day of the spring is starting with renewed selling, which threatens to take the main indicator of the US stock market back to the 5880 level and the recent lows.

Traders are waiting for Tuesday, when after a one-month delay, 25% tariffs on imports of goods from Canada and Mexico are set to take effect. Chinese products imported into the US will be subject to an additional 10% tariff. Experts interviewed by CNBC found it difficult to assess the possible impact of these actions of the US authorities, but spoke unequivocally about the decline in the attractiveness of most stocks.

John Butters, senior analyst at FactSet, reported on the already ongoing downward revision of earnings forecasts for US companies. The average estimates for Q1 2025 were lowered by 3.5%, with the main victims being the materials sector (-16.2%) and consumer goods (-8.8%). A growing number of market participants fear that Donald Trump's policies will lead to a simultaneous rise in inflation and a sharp slowdown in GDP growth. The stagflation scenario is extremely bearish for the stock market.

Steve Sosnick, chief strategist at Interactive Brokers, believes that the right choice in the event of stagflation are stocks of companies that produce basic goods and utilities. However, these sectors make up a very small portion of the S&P 500 Index, which has long been dominated by IT companies. If investors begin to rebalance their portfolios according to this principle, the decline in the S&P 500 could continue.

As long as the index does not consolidate above the 6020 level, it is unlikely that the bears will let up with their sights set on the 5880 level.

Consider the following trading strategy:

Sell S&P 500 at the current price. Take profit - 5880. Stop loss - 6020.