S&P 500 At A Pivot Point

Upward Momentum In The S&P 500

The S&P 500 had solid upside momentum last week, closing at pre-liberation day levels, as sentiment moved to risk-on.

While GDP data was negative and likely shaped by imports, the news that China was open to tariff talks and the better-than-expected Nonfarm Payroll report were tailwinds for stocks.

It’s easy to lose sight of how fast the market is moving. It’s a market where you can be onside with a move in the market and market sentiment; yet, at any given time, the next headline or absence of a headline moves the market against you.

Some of the swiftest and most volatile rallies occur during bear markets. Structurally, the S&P 500 is still in a bear market, and markets don’t go down in a straight line.

Headwinds

Earnings expectations have been lowered. Margins and capital expenditure will reflect that and could become more apparent in the labour market.

The impact of the tariffs on U.S. supply chains is not fully realised, and, therefore, the impact on the economy is not priced in.

So, the S&P 500 is in a no-man’s land between the initial tariff shock and the eventual impact on hard data. It will likely remain in that no-man’s land until the late second or early third quarter.

There are headwinds to navigate over the course of this year, and the probability of a recession cannot be ruled out.

Tariff Clarity Needed

While easing trade tensions is a positive factor, a trade deal between the U.S. and China remains conjecture until both countries confirm that it has been signed.

Any trade deal, given that China is playing hardball, is unlikely to happen until the deadline for a 90-day pause in tariffs is near.

Fundamentally, the Trump administration has not changed course.

While the tariff narrative has dominated the headlines, the picture will become clearer, and more important policy adjustments lie ahead.

In the meantime, traders and investors would do well to view things through a risk-to-reward lens and avoid being whipsawed by the markets.

Capital preservation remains the primary objective.

S&P 500 Key Levels:

The S&P 500 opens in positive gamma today. The gamma flip zone sits at 5428, the call resistance level is 5698, and the put support is 5244.

As noted in our previous post, the probability of resistance at the 5700 level remains high. It must close above this level today to confirm the current upside momentum.

Expect chop consolidation.