S&P 500 Waiting For THE Trade Deal

The S&P 500 Looks To Trade With China

The S&P 500 responded positively to the announcement of a trade arrangement between the U.S. and the UK.

The announcement provided insight into the framework for future trade deals, specifically the fact that the base tariff of 10% remained in place.

Trade discussions with China took place over the weekend. In reality, that is THE trade deal that will likely shape the direction of the markets.

While a trade deal with China will take time to materialise, any reduction in the current tariff levels will likely act as a tailwind for stocks.

That said, Trump’s post suggesting that an 80% tariff would be a fair level for China is unlikely to be received positively by China or the markets.

Earnings

Earnings for the first quarter were strong, as anticipated. Growth is 14% (comfortably beating the analyst expectations for growth of 7.8%), and 75% of companies reported above analyst expectations.

Strong earnings have fuelled a surge in buyback announcements, which will act as a positive catalyst for price action.

U.S. household debt payments as a percentage of disposable income rose again in quarter one to 11.3%. However, it remains comfortably below the highs of 15.8% seen during the Great Financial Crisis and is not yet back to pre-pandemic levels.

S&P 500 Key Levels:

The S&P 500 opens in positive gamma today. The gamma flip zone sits at 5430, the call resistance level is 5700, and the put support is 5245.

As noted in our previous post, resistance at the 5700 level remains high.

The failure to close above this level signals that the market remains in a downtrend.

While the market has rallied 14% from the Liberation Day lows, much of that rally is driven by retail investors. Hedge funds and institutional investors remain on the sidelines.