US stock market outflow limits S&P 500 rebound

Last week, the S&P 500 index was trading sideways, failing to develop a rebound from a six-month low. At the beginning of Monday’s trading session, the bulls make another attempt of growth, but they may face serious resistance from sellers at the level of 5,760. In this scenario, the US stock market will remain in the correction phase, especially in case of returning to 5,660. 

Today’s raising optimism of traders was a result of hopes for another change in import tariffs, which Donald Trump promised to impose starting April 2. The duties may turn out to be less sweeping than originally announced, but their very discussion has already caused a deterioration in the outlook for the US economy. According to CNN, more investors are considering investing in European and Asian countries, trimming their positions in the US market. 

A study conducted by Bank of America showed that over the past month, the share of US stocks in portfolios was declining at the fastest pace since 1999. At the same time, European stock markets posted the largest inflow of liquidity over the last 4 years. Chief financial officer of FedEx John Dietrich aggravated the situation on Friday. He significantly worsened the corporation's 2025 earnings forecast, referring to the high level of uncertainty in the US economy.

David Russell of TradeStation highlights the S&P 500's strong leadership among global peers over the past few years. Now traders seem to be considering its growth outlook insufficient and to be switching to other financial assets. It does not mean that US stocks will continue to fall, but their recovery will require major drivers. Until such factors appear, the S&P 500 index may move to consolidation at current levels.

The Stochastic indicator has reached the overbought zone, which means the end of the upward rebound of the price. Short-term profit taking on long positions will bring the S&P 500 index back to 5,660.

Consider the following trading strategy:

Sell S&P 500 near the level of 5,760. Take profit – 5,660. Stop loss – 5,835.