Will the market extend Friday's losses amid Trump's upcoming tariff announcement?
The S&P 500 closed 1.97% lower on Friday as investors grew increasingly concerned about President Trump's upcoming tariff announcements scheduled for April 2nd. The selloff erased most of the gains made during the recent rebound, suggesting the downtrend may be resuming.
This morning, futures are pointing lower again, with S&P 500 futures down 0.7% and Nasdaq 100 futures showing even more weakness with a 1.0% decline. This continued selling pressure comes as markets brace for what the Wall Street Journal reports could be "bigger and broader tariffs against major U.S. trading partners."
Investor sentiment has slightly improved, as shown in last Wednesday’s AAII Investor Sentiment Survey, which reported that 27.4% of individual investors are bullish, while 52.2% of them are bearish.
The S&P 500 pulled back below 5,600, as we can see on the daily chart.
S&P 500: Lower Last Week
The S&P 500 lost 1.53% last week, retracing its rebound after setting a local high on Tuesday.
On March 17, I wrote “The market may have found a temporary bottom, confirming the importance of the 5,500 support level. On the other hand, resistance is now at 5,800.” This proved to be correct, but only temporary, as the market retraced most of its advances.
However, it may still be just a consolidation following February-March sell-off.
Nasdaq 100 Shows Increased Weakness
The tech-heavy Nasdaq 100 is showing even more pronounced weakness, retracing almost all of its rebound. This morning's Nasdaq 100 futures indicate further pressure, and the index could break below its March 13 low.
VIX Moved Above 20
The VIX index, a measure of market volatility, rebounded last Wednesday following declines in stock prices. On Friday, it reached a local high of 22.18, signaling increased fear in the market again.
Historically, a dropping VIX indicates less fear in the market, and a rising VIX accompanies stock market downturns. However, the lower the VIX, the higher the probability of the market’s downward reversal. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.
S&P 500 Futures Contract Reaches New Low
This morning, the S&P 500 futures contract is trading near its new local low of around 5,552. On Friday, before the open of the index I wrote, that the market is at the crossroads. It definitely chose its way lower. Currently, resistance remains around 5,650, marked by recent local lows.
Conclusion
Monday's session will likely be dominated by positioning ahead of Wednesday's critical tariff announcements. While some technical bounce is possible after Friday's sharp decline, the overall trend appears to be shifting back to the downside.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 sold off sharply on Friday.
- Trump's expected broad tariff announcements pose significant economic uncertainty.
- Technical breakdowns in major indices suggest further weakness.
- In my opinion, the short-term outlook is neutral.
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Thank you.
Paul Rejczak,
Stock Trading Strategist