US trade tariff update triggers stock market correction

Yesterday, the S&P 500 and other major indices showed signs of entering a correction. On the daily chart, prices fell below the 14-day moving average, which is a potential early warning signal. The index has been technically overbought since early July, with a growing divergence between quotes and the RSI oscillator since May.

The drop was triggered by the American administration's latest round of trade tariffs, following the expiration of President Trump's August 1 deadline.

The US imposed a 39% duty on Swiss imports, marking the highest rate applied to any country except China and setting a record among key American allies. Nearly half of Switzerland's exports to the United States are pharmaceuticals and high-tech chemicals. The former could face further tariff hikes under existing provisions from the Trump administration. In a separate move, duties on Canada—the largest US trading partner and a major holder of American securities—were unilaterally raised from 25% to 35%. 

Under the new tariff system, imports from India are subject to a 25% duty, while products from Thailand, Cambodia, Pakistan, and Malaysia face 19%. South African goods see 30% fees, Brazilian shipments 10%, and exports from Israel, Norway, New Zealand, and Turkey 15%.

Trump granted Mexico a 90-day exemption before enacting tariffs on goods that fail to meet USMCA standards. Meanwhile, preliminary 10% tariffs will be imposed on goods from Australia, Singapore, and the UK. 

The aforementioned rates on Mexico will take effect within one week.

All these protectionist measures weigh heavily on market sentiment, putting downward pressure on major indices, including the S&P 500.

The overall recommendation is to sell SPX.

Profits should be taken at the level of $6,030. A Stop Loss could be set at $6,500.

The volume of the opened position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance doesn’t allow opening a position of this size, it’s better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.