Yesterday’s events dampened sentiment in the US stock market.
First, President Donald Trump's tax and spending cut bill faces a critical test on Wednesday as House Republicans show internal divisions, casting fresh doubt on the viability of his economic agenda.
Second, criticism is mounting over the recent US credit rating downgrade. The rating cut was driven by unsustainable debt levels far exceeding government revenues. Lawmakers must now take action to improve the nation’s fiscal health, or risk another downgrade. And this will likely prove even more painful. The country is already on track to grow its debt from $22 trillion to $36 trillion over the next decade. President Donald Trump's tax bill could further accelerate borrowing, expanding the debt burden.
Third, mere days after the US and China declared a tariff truce, tensions are flaring anew, this time over Huawei's advanced semiconductors. The conflict surrounding Huawei's cutting-edge chips underscores that despite last week's conciliatory rhetoric from both nations' negotiators, deep-rooted disagreements on multiple fronts persist, which are difficult to resolve. On Wednesday, China’s Ministry of Commerce issued fresh criticism, accusing the US of 'abusing export controls to suppress and contain China' and participating in what it called 'typical acts of unilateral bullying and protectionism.'
These events are creating stronger headwinds for the stock market rally, including for the S&P 500 index, which, as previously noted, has formed a technical bearish divergence.
The overall recommendation is to sell SPX.
Profits should be taken at the level of 5700. A Stop loss could be set at the level of 5900.
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.
