S&P 500 is in correction due to trade tensions and recession fears

The S&P 500 Index entered correction territory last week, closing on March 13 about 10% lower than February's record high. Investor sentiment worsened due to trade tensions and concerns about the economic outlook. On Monday, March 17, the index opened at 5,606.7.

Escalating trade tensions have put pressure on stock markets and heightened fears of a recession and stagflation. Pessimism is increasing due to forecasts of slowing economic activity and growing inflationary pressure caused by high tariffs and declining consumer confidence.

Even so, the S&P 500 index has not yet entered a bearish phase, which is defined by a 20% drop from the all-time high. Analysts also forecast positive dynamics of the index this year, albeit it is unlikely to return to the February peaks.

Investors are now waiting for signals confirming the economic stability. This week, they will focus on Fed Chairman Jerome Powell's speech, the regulator's interest rate decision, and initial jobless claims. These data will help them to determine the outlook for economic growth and the impact of monetary policy on the markets.

Technical analysis also indicates the potential for stopping the decline and possible price recovery. There is a stable downtrend on the MACD chart: the blue and red lines are below the zero mark, while the histogram continues to expand in the negative direction, confirming the bearish dominance. However, a correction is possible when the lines converge.

The Stochastic Oscillator also indicates the downtrend, which lasted until March 13, when the oversold zone was reached. However, the current crossing of the %K line above the %D line suggests that an upward correction is forming. This may indicate the recovery of the prices after the oversold period. The market is likely to show a rebound in the near future, which creates conditions for potential growth.

Current recommendation:

Buy at the current price. Take profit — 5,766. Stop loss — 5,406.