I've recently written about President Trump's global tariff war, and its effects on U.S. and global markets, here and here.
Today's article will focus primarily on the S&P 500 Index (SPX) and what may lie ahead for its potential targets.
The following weekly SPX chart contains two Fibonacci retracement drawings...one taken from the week of the March 23, 2020 low of 2191.86 and the other from the week of the October 10, 2022 low of 3491.58, both to the all-time high of 6147.43 from the week of February 17, 2025.
I'm mainly interested in where their respective levels overlap or are fairly close, generally speaking, following its dramatic price drop in the past several weeks, which may determine price targets, as well as support/resistance levels, in the coming days/weeks.
Price is currently sitting below a confluence of two levels around 5130 and 5200. The next confluence levels lie from approximately 4500 to 4630 and 4800. Further below, the next ones sit around 4050 to 4170.
These areas of confluence represent upside and downside targets.
Weekly SPX chart
The following daily SPX:VIX Ratio chart may help to provide clues relative to support and resistance levels.
The ratio price is nearing a previous Bull/Bear Line-in-Sand level of 100, after plunging below its current level of 150.
A drop to 100 (or overshoot it a bit) may coincide with a price drop of the SPX to around 4800, or so.
Should the ratio continue its slide towards the 60 historical/critical Bull/Bear Line-in-Sand level, we may see the SPX plunge towards the lower confluence levels from 4050 to 4170.
The question, of course, is timing, as to how quickly or likely such scenarios may play out. That is up in the air and depends on momentum and external factors, such as economic conditions, monetary policy, financial policy and conditions, and political, business and consumer influence/pressure.
At the moment, the 50 and 200 MAs are currently under the influence of a bearish Death Cross on the SPX/VIX ratio...so, until they reverse, the bears are in control of price action.
Daily SPX:VIX Ratio chart
Year-to-date percentages gained/lost by the U.S. Major Indices are shown on the following graph.
Nasdaq Indices have been hit the hardest, followed by Small Caps, then S&P 500 and 100, and, finally, Dow Indices.
U.S. Major Indices
Percentages Gained/Lost YTD
U.S. Major Indices
Year-to-date percentages gained/lost by the U.S. Major Sectors are shown on the following graph.
Technology is the biggest loser, followed by Consumer Discretionary, Biotech, Home Builders, Industrials, Financials, Energy, Materials, Health Care, and Utilities. Consumer Staples gained 0.34%.
U.S. Major Sectors
Percentages Gained/Lost YTD
U.S. Major Sectors
Keep an eye on Technology and Consumer Discretionary for signs of a slowdown or pause, which may cause markets, in general, to follow suit.
With respect to the Consumer Discretionary sector, keep an eye on the Kraneshares Global Luxury Index ETF (KLXY).
It's fallen 15.63% below its IPO price, as shown on the following weekly charts.
Further weakness in this ETF could spell further trouble for U.S. markets, in general.
KLXY Weekly chart
KLXY Weekly % chart
All in all,
markets are currently very weak, with
Fed Chair J. Powell signalling this past week that
economic conditions are weakening and inflation is on the rise.
Should President Trump fail to reverse course on ALL of his excessively punitive and damaging tariffs on countries around the world, we may see stagflation rear its ugly head in the U.S. -- and the SPX drop to around 4050 -- sooner rather than later (with daily plunges in global markets, like this past Friday's, as shown below)...before we see capitulation and reversal in U.S. markets.
N.B. In any event, what country's leader would trust him ever again to negotiate any kind of new trade agreement in good faith (and honour them), inasmuch as he just blew up all of them with these tariffs...and could do so again, on a whim? 👀
AND, he's given NO indication that he would remove these tariffs, even if new trade agreements were negotiated! In fact, he has already stated that they are permanent.
How else would he be able to pay for his plan to extend income tax cuts and get Congressional approval to do so?
Global Markets April 4, 2025
FINALLY, I'd just mention that the U.S. MOVE Index (which measures the level of volatility in Treasury futures) has not yet spiked to historical highs, as shown on the following monthly chart.
Should that continue rising, look for stocks to continue to drop.
MOVE Index Monthly chart
So, buckle up!
* UPDATE April 7...
U.S. markets paused by the end of the day, following volatile and extreme intraday whipsaw moves to the upside and downside, while Asian and European markets (et al) plummeted in overnight trading...some much more than others.
We'll see how long any deadcat bounce occurs in world markets, in general, before continuing another leg down.
As long as President Trump's tariffs remain in place on global markets, creating rising economic and business investment uncertainty/chaos, this scenario is a distinct probability.
Such extreme volatility is NOT a sign of healthy markets, especially in the U.S.!
TIP: Watch and
wait for what
Trump ACTUALLY DOES (
confirmed in writing in, either, an
Executive Order, or a
signed trade agreement)...
NOT what he
SAYS he
will do/
is doing...to
verify.
BUT, then there's that TRUST issue that been forever damaged, regardless...🤔
