FUNDAMENTAL
OVERVIEW
The S&P 500 futures
opened lower yesterday following Trump’s
escalation over
Greenland over the weekend. As a reminder, the US President threatened to
impose 10% tariffs starting on February 1 on the UK, France, Germany and a few
other European countries unless the U.S. is permitted to buy Greenland. The
tariffs will rise to 25% from June 1 in case of no deal.
As we’ve seen last year,
risk-off moves caused by Trump’s tariffs stemmed from growth worries. Growth
expectations are the main driver of stock markets and when something leads to
negative expectations, we generally get selling pressure until those
expectations are corrected.
Everyone is now waiting for
the famous TACO (“Trump Always Chickens
Out”) trade. The market’s focus in now on this latest escalation, so
monitoring the developments will be key and will offer trading opportunities.
The risk sentiment will likely stay on the defensive until we get some clear
de-escalation from Trump. If things escalate further, we should see more
downside before Trump eventually folds.
Trump will deliver a speech tomorrow at the World Economic Forum in Davos. He already mentioned that he will talk about Greenland with other leaders, so we could get some new developments before the weekend.
Today we have also a
potential US Supreme Court decision on Trump’s tariffs. If SCOTUS rules against
tariffs, we could get a relief rally in the short-term, although Trump’s aides said
that they have already a plan to impose tariffs with other means. If tariffs
remain in place, then it shouldn’t change anything.
S&P 500
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see that
the S&P 500 is breaking below the
key swing level around 6,865. The sellers have likely piled in on the break to
extend the selloff into the next major swing level at 6,770. The buyers will
want to see the price rising back above the 6,865 level to start positioning
for a rally into the weekend gap.
S&P 500
TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, we can see that
we have a downward trendline defining the bearish momentum. If we get a
pullback, we can expect the sellers to lean on the trendline with a defined
risk above it to keep pushing into new lows. 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 we can add here as the sellers will look for shorts around the 6,885
level and the trendline, while the buyers will look for longs on the breakouts.
The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the weekly US ADP jobs data and the potential US Supreme Court
decision on Trump’s tariffs. Tomorrow, we have Trump’s speech at the World
Economic Forum in Davos. On Thursday, we get the latest US Jobless Claims
figures. On Friday, we have the US Flash PMIs. Watch out for headlines and
Trump’s posts on Truth Social regarding Greenland as the market’s focus remains
on this latest escalation.
This article was written by Giuseppe Dellamotta at investinglive.com.