This week, the US stock market has been overtaken by positive sentiments, which prompt leading indices, including the S&P 500, to rise. The problem is that this apparent positivity is only about eliminating excessive negativity. The trade war still poses major risks, a possible recession remains intact, and inflationary pressures are likely to surface in the economic data. After a 50% correction from its lowest, the S&P 500 is now likely to decline further, but at a calmer, more moderate pace, while creating downward channel patterns.
Overall pressure of persistent negative factors, which is pushing the market down, is to burst from time to time triggered by the US administration’s inconsistent and erratic policy.
A case in point is Donald Trump claiming yesterday that 25% tariffs on Canadian automobiles could be raised. He told the Canadian representatives, “We don’t want your cars, in all due respect. We want, really, to make our own cars.”
Given the situation, all other statements about easing tariffs on US trading partners could also be changed any minute. What are the guarantees that, having embarked on a path of de-escalating trade tensions with China, Trump would not change his stance?
Thus, the bearish scenario for the stock market remains the most likely one. Besides, yesterday, the S&P 500 created a technical gap at 5,350. To fill the gap, the index must fall to 5,310, which is likely to happen in the nearest term.
The overall recommendation is to sell SPX.
Profits should be taken at the level of 5,310. A Stop loss could be set at the level of 5,400.
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.
