Despite robust macroeconomic data from the US, the S&P 500 has eroded its initial rally posted at the open of the markets this Monday. This move was somewhat surprising, given the optimism surrounding the possibility of coronavirus vaccines being deployed as early as December. However, the indecision of the S&P 500 may not be unconnected with the classification of several Chinese firms and entities as adjuncts of the Chinese military by the US government over the weekend. This classification sets up these entities for possible US sanctions, which could potentially reignite the US-China spat.
The renewed hardline stance against China comes months after US President Donald Trump vowed to hold China responsible for the coronavirus outbreak. Senior White House Officials have been quoted as saying that the intention is to prevent coercive diplomacy by China using its immense trading power.
Lately, China has been driving the recovery of commodities such as copper and silver. Allegations of economic pressure on Australia following the latter’s call for an independent inquest into the origins of the coronavirus outbreak in May, appear to be the motive behind this renewed onslaught on Chinese economic interests. China is Australia’s biggest market, and China remains the number 1 destination for Australia’s raw material exports.
Richmond Fed’s President Barkin also threw cold water on early widespread deployment of a coronavirus vaccine, saying that the summer of 2021 was the earliest such broad-based rollout would be seen. As reported by Reuters, Barkin also noted that feedback from employers in healthcare and technology indicated that there were not enough skilled staff to make such a rollout possible until “summer at best”.
The S&P 500 is trading flat at 3570.7 at the time of writing.
Technical Outlook for S&P 500
Price action on the S&P 500 remains hesitant despite robust data and risky sentiment. Today’s low-volume move found resistance at the 3588.6 price level and quickly retreated to form a Doji. The break above the symmetrical triangle on the daily chart is still valid, but the price would need to break above 3588.6 as well as the all-time high at 3646.0 to establish new highs.
On the flip side, a decline below the immediate support at 3528.9 allows 3481.6 to come into the picture. This leaves 3393.5 and 3335.5 coming into view as additional targets to the south.
S&P 500 Daily Chart