S&P 500 is vulnerable due to geopolitical pressures

The S&P 500 index started the week under pressure as geopolitical tensions are escalating and uncertainty around US trade policies is growing. The index declined 0.72% on Monday morning trading, extending last week’s losses.

Trade risks remain the center of attention. Despite partially easing the tariffs, US President Donald Trump’s administration is sticking to a tough course with China. The lack of direct negotiations between the world’s largest economies makes investors anxious. Additional pressure is exerted by Beijing’s statement urging countries not to enter into trade deals that discriminate against China’s interests.

Markets are also reacting to political pressure on the Federal Reserve (Fed). Harsh statements toward Jerome Powell and potential interference in Fed policymaking heighten concerns about the regulator’s independence. This sparked a rise in Treasury bond yields and the weakening of the dollar, which hit three-year lows. 

Investors are cautiously awaiting the start of the busy corporate reporting season. Over 100 companies in the S&P 500 are to release quarterly data, including Alphabet, Tesla, Boeing, and Verizon. Given a slowdown in high-tech, investors will be monitoring the prospects of the Magnificent seven, whose stocks have already declined since the beginning of the year.

From the technical point of view, the daily chart (D1) shows the S&P 500 forming downtrend. 

On the H4 timeframe, the price is approaching the local average line, which can serve as support. At the same time, the MACD histogram (standard settings) has fallen below zero, indicating the strengthening of negative dynamics. Breaking the average trend line may enhance the downward move.

Signal:

The short-term outlook for S&P 500 suggests selling. 

The target is at the level of 4,840.0.

Part of the profit should be taken near the level of 5,080.0.

A stop-loss could be placed at the level of 5,600.0.

The bearish scenario is short-term, so a trading volume should not exceed 2% of your balance.