Summary:
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More downside seen in equities with US set for red open
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S&P500 falls to levels not seen since March
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Market retests 50 day SMA
Trade continues to dominate the front and centre of traders minds ahead of the US session with equities falling further as the risk-off mood prevails. There’s been little by the way of fresh developments in the past 24 hours, but the market seems to be becoming increasingly concerned that additional US tariffs on China will be levied tomorrow. Wednesday’s session had appeared fairly positive for US stocks, with the S&P500 finding a firmer footing and trading in the green before a bout of selling hit going into the cash close.
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US stocks recovered throughout Wednesday’s session before a spate of selling into the close erased most the gains. Price has since declined further and in the past half an hour just fallen to its lowest level of the week. Source: xStation
The whole move began with Trump’s tweets over the weekend and the President doubled down on his stance during a rally in Florida yesterday. "By the way, you see the tariffs we're doing? Because they broke the deal. They broke the deal," Trump said. "So they're flying in, the vice premier tomorrow is flying in — good man — but they broke the deal. They can't do that, so they'll be paying." There is still time for last minute concessions but if the president is looking to play a game of brinkmanship, then the situation is perilously close to the cliffedge. Trump added that the United States "won't back down until China stops cheating our workers and stealing our jobs." "That's what's going to happen. Otherwise, we don't have to do business with them," he said. "We can make the product right here if we have to — like we used to.
The technical situation for the S&P500 is interesting with the market dropping to its lowest level since March and in doing so revisiting the 50 day SMA. The gap higher from late March at 2839 is the next level to look to on the downside but if price drops below there then the 23.6% fib comes in at 2809. Given the scope of the rally seen year-to-date there is significant scope for further declines should the situation go from bad to worse with the 38.2-41.4% region from 2694-2715 still some 140 points away. In terms of possible resistance 2900 has acted as a barrier on a couple of occasions in recent sessions.
The S&P500 has dropped to its lowest level since March and is now back at the 50 day SMA. Gap higher from 28th March at 2839 remains unfilled. Source: xStation
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