Last Friday, February 21, the S&P 500 index was subject to an impulsive sell-off. As financial observers later explained, the cause for this was the uncertainty and risks surrounding Trump's announced trade duties, as well as weak US business activity data in January.
As for the trade tariff risks, the market has been aware of them for months. The market should have already analyzed them and priced them in, therefore it is unlikely that this was the trigger for the sell-off.
Business activity data is also ambiguous. The Services Purchasing Managers Index (PMI) dropped into contraction at 49.7, falling short of the previous reading of 52.9 and the forecast of 53.0. Meanwhile, the Manufacturing PMI showed an increase to 51.6 from 51.2 in the previous month.
The overall picture was more likely marred by the University of Michigan's survey: one-year ahead inflation expectations rose a full percentage point from 3.3% to 4.3%, long-run inflation expectations rose from 3.2% to 3.5%, the consumer expectations index fell from 69.3 to 64.0, and the current conditions index fell from 74.0 to 65.7.
If we generalize the published data, it is short-term and has no long-term impact, which, in fact, caused a small panic sell-off of the S&P 500 index, which was more of a technical nature of relieving the accumulated overbought condition on updating the historical high of the index.
The overall recommendation is to buy the S&P 500 index.
Profits should be taken at the level of 6100. A Stop loss could be set at the level of 6000.
The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
