Following a sharp decline and an equally strong recovery of approximately 80% of its initial plunge, the S&P 500 has entered a consolidation phase, forming a descending triangle.
Volatility will gradually fade until new major catalysts emerge, which could spark another storm in the market.
While the US administration’s 90-day tariff pause has taken the worst immediate risk off the table, all the other negative pressures remain, and on top of that, uncertainty has actually increased.
The hike in tariffs on Chinese imports, now up to 145%, marks an escalation of the negative scenario. Markets are growing increasingly concerned, to put it mildly, that the temporary pause will lead nowhere except another phase of the trade war. Given Trump’s unpredictability, his declared three-month delay could end far sooner. At any moment, new conditions could emerge that would completely upend the current cooling-off period in trade tensions.
Trading volumes have dipped slightly but remain exceptionally high at $591 billion. Since April 3, daily trading (an all-time record) has been surpassing what we used to see in an entire month just a short while ago.
Looking at the newly formed short-term support and resistance levels for the SPX, it’s clear that the 5500 level was tested from above downwards. Currently, there’s still untested local support at 5050, but prices will likely drop to this target in the near term.
The overall recommendation is to sell the SPX.
Profits should be taken at the level of 5050. A Stop loss could be set at the level of 5450.
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.
