U.S. indices have started the week on a weak note, although the S&P 500 (US500) contract finding support at 5950 points may suggest that Wall Street still has an appetite for a repeat of last week’s pattern—where Monday’s declines were gradually recovered through Friday. However, much of last week’s rebound was erased on Friday evening, and after the weekend, indices opened with a sizeable downward gap, signalling supply dominance, which is also reflected in trading volumes.
- Last week’s data showed that hedge funds had been selling stocks at a record pace for weeks, reinforcing the risk-off sentiment amid uncertainty over tariffs and their potential impact. At the same time, tariff finality remains uncertain, as Trump could still revoke or alter them by tomorrow.
- On the corporate front, Alphabet (GOOGL.US) is set to release earnings tomorrow, followed by Amazon (AMZN.US) on Thursday after market close. Today, Palantir (PLTR.US) and Tyson Foods (TSN.US) will report, but regardless of their results, neither is likely to significantly impact overall market sentiment.
Market focus will remain on Donald Trump and China’s potential response to the new 10% tariffs on Chinese goods. According to Federal Reserve model estimates, if Mexico, Canada, and China retaliate with equivalent tariffs, U.S. PCE inflation could rise by 0.7 percentage points, while GDP in 2025 could be 1.2 percentage points lower. This scenario raises concerns over a potential economic slowdown, higher inflation, and sustained pressure on the Fed to keep interest rates elevated, all of which are negative for the stock market. The key question is whether any news in the coming hours or days will help ease these concerns and reduce market fear.
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Analyzing the S&P 500 futures (US500) trading pattern, we have observed four significant corrections since the second half of December 2024, each with a similar range of approximately 200 points. If a similar downward impulse unfolds from current levels, we could see a test of the 5800-point level, which also aligns with the local low of January 2025. Conversely, if a rebound from current levels continues, it could signal the formation of a strong bullish double-bottom pattern near 6000 points. For this bullish scenario to materialize, key medium-term resistance levels would be 6060 points (the pre-gap level) and 6130 points (recent local highs).
Source: xStation5
