US stocks to open under pressure after Lighthizer comments

Summary:

• US stocks markets to open in the red

• Comments from Lighthizer cause swoon after closing bell

• H4 cloud break for S&P500

It’s set to be a sea of red for US stocks on the opening bell with futures swooning not long after Monday’s cash close following some hawkish comments from Robert Lighthizer. The US trade representative said that tariffs on China will rise on Friday in an announcement that confirms the remarks made in Trump’s tweet.

The week had gotten off on the wrong foot after Trump’s tweet on Sunday, but the large gap lower proved a buying opportunity for the US session as the US indices rallied throughout and ended the day not that far from where they finished Friday. However, a large part of this recovery was wiped out in little time on Lighthizer’s comments, which show that there is substance behind Trump’s post and that we could well be set for a further escalation in the US-China trade war by the end of this week.

The recovery was close to complete yesterday before Lighthizer’s comments sparked a drop of  around 25 points in less than 5 minutes. Source: xStation

The decisive fundamental factor for US stocks in general this week will be the fallout from the escalation of trade tensions and traders should watch any further developments closely. From a technical point of view though, there is some apparent weakness around and it is perhaps telling that both the rally seen throughout Monday’s session and the attempted pop higher this morning both printed new lower highs.

From a longer-term perspective the market has appeared to stall in the past week or so and there is some suggestion that the trend may be turning lower with price dropping below the Ichimoku cloud on H4. As you’d expect, the market has been above this trend identification tool for the vast majority of the year as price has rallied strongly. Only during the pullback seen at the start of March had the market made a confirmed break lower, but with the lagging line dropping below the cloud in recent trade there is now another chance for the bears to attempt to press home their advantage. The unfilled gap higher from 2839.3 could be a possible target for those looking for further downside. A move above the daily high of 2930 would no doubt be positive and would see price return to the H4 cloud once more.

 The S&P500 has moved back below the H4 cloud with a confirmed break for only the second time this year. Is this a chance for shorts to push price back towards the unfilled gap from 2839. Source: xStation

A closer look reveals the lagging line is now below the cloud and confirming the break lower. Source: xStation