S&P 500 Technical Analysis – Trump adds fuel to the fire

Fundamental Overview

The S&P 500 extended the selloff yesterday following fresh Trump’s tariffs threats and especially additional 10% tariffs on China. The market has been under pressure ever since last Friday when we got the weak US Flash Services PMI and later the jump to a new 30-year high in long term inflation expectations in the Final UMich Consumer Sentiment survey.

The bulk of the selloff came after the jump in the long-term inflation expectations though. The market might be fearing that in case we get a slowdown, the Fed might not be fast enough in cutting rates amid inflation remaining above target and uncomfortably high long-term inflation expectations. Trump’s tariffs threats add to expectations of a slowdown in growth.

March will be a great month for traders because we will probably have the most important NFP and CPI reports of the year ahead of the March FOMC decision where we will also get the updated SEP and Dot Plot. The markets will need benign data on the employment front coupled with easing inflationary pressures to trigger a rally. Conversely, bad data coupled with higher inflationary pressures might even lead to a new bear market.

S&P 500 Technical Analysis – Daily Timeframe

On the daily chart, we can see that the S&P 500 is bouncing off of the key trendline as the dip-buyers are stepping in with a defined risk below the trendline to position for a rally into a new all-time high. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 5720 level next.

S&P 500 Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we now have a downward trendline defining the bearish momentum. If we get a pullback into it, we can expect the sellers to lean on the trendline with a defined risk above it to position for the break below the major trendline. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.

S&P 500 Technical Analysis – 1 hour Timeframe

On the 1 hour chart, there’s not much else we can add here as the buyers will look for a bounce around these levels, while the sellers will target a break below the key trendline to extend the selloff into new lows. The red lines define the average daily range for today.

Upcoming Catalysts

Today we conclude the week with the US PCE data.