Keep buying SPX with target of 5,930

The Federal Reserve (Fed) will release new economic forecasts this week. The US central bank officials are set to assess the impact of the Trump administration's policies that have shaken the country's robust economic outlook.

Trade standoffs unleashed by the new administration and sluggish consumer expectations are both signaling fears of recession and inflation.

Public statements prior to the release suggest three possible scenarios. According to the first one, inflation will slow down or the economy will weaken, allowing the Fed to cut rates further. In the second case, inflation will remain higher than the Fed's target, and monetary policy will stay tight for a longer period of time. Finally, in the third scenario, inflation is expected to be high while the economy slows. In the latter case, the officials would have to make a choice between their inflation and employment targets.

There is a growing risk that supply-side shocks from imposed tariffs, slowing immigration, and federal government labor restrictions will dampen overall demand. The risk of recession in the United States over the next 12 months now stands at 25%, or twice the average.

Most economists (70 out of 74) surveyed last week in Canada, the US and Mexico said the risks of recession in their economies have increased due to Trump's chaotic tariff policies. Also, in a survey among the top 200 American companies’ CEOs, 85% of respondents stated that the economic outlook has deteriorated due to new trade restrictions.

It may be assumed that under such circumstances the US stock market, even if it maintains its upward momentum, will often pull back downwards. These drawdowns will be absorbed by the buyers at lower price levels, stimulating short-term surges in the quotes, including the S&P 500 Index. One of these situations, in which a drawdown in the S&P 500 caused by an emotional reaction is bought back, may be seen at the moment.

The overall recommendation is to keep buying the S&P 500 Index.

Profits should be taken at the level of 5,930.0. A Stop loss could be set at the level of 5,500.0.

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.