S&P500 Slumps on Renewed US-China Trade Summit Pessimism
The S&P500 index has opened sharply lower as risk aversion sweeps through the financial markets this Tuesday. The S&P500 futures are trading at 2898.8 as at the time of writing, after starting the day at 2950.
The slump in the S&P500 follows a similar selloff in major European markets, after Bloomberg reported that blacklisting of Chinese companies from a government pension fund could be in the offing, according to some White House sources close to the situation. The Chinese Foreign Ministry has issued a statement in response, claiming it would retaliate if the US follows through on this plan.
These developments have cast a serious cloud over the US-China trade summit scheduled to begin later in the week. This is driving the pessimistic market response all around.
Today’s opening slump in the S&P 500 futures brings the daily candle very close to the ascending support trendline. This trendline connects the lows of price activity from June 3 to October 3. However, the price candle is testing the support formed by the lows of September 3 and the role reversed highs of June 13 (former resistance now acting as a support). This level has to be overcome for price to make it to the ascending support trendline.
The initial downside target lies at 2853.8 (May 6 and Aug 27 lows). Below this level, further downside targets lie at 2803.6 (Mar 27,May 14 and Aug 13 lows) as well as at 2744.0 (Mar 8 and June 3 lows). Price must take out a key level for the next downside target to come into focus. The price also needs to close below the ascending trendline to mount a push to the initial downside target at 2853.8.
On the flip side, a rejection of price at the ascending support trendline could open the door for a retest of the 2956.0 resistance level formed by the highs of April 30, June 21 and Oct 7.