The US indices continue to see a lot of selling pressure, as the tariff wars continue. This being the case, it has become more of a “fade the rally” kind of game at this point in time.
The NASDAQ 100 initially tried to rally during the day on Wednesday but then gave back quite a bit of the gains and went negative again as we continued to bounce around and see a lot of selling pressure overall. All things being equal, this is a market that I think continues to see a lot of fade the rally type of action.
And that’s exactly how I would approach it at this point. I don’t typically like shorting indices, but you certainly can’t buy them in this type of environment. Remember, it only takes a handful of stocks going bullish again to turn this thing around. We just aren’t there yet, and therefore, I think we probably continue to see downward pressure.
The Dow Jones 30 has broken below the 37,000 level, opening up the possibility of a much deeper correction towards the 35,000 level. It’ll be interesting to see if that continues, but clearly the market has somewhat got out of control, and now we are just moving on the latest headline.
We saw that earlier this week when there was a rumor that President Trump was going to pause tariffs for 90 days. That, of course, was not true and the market turned around and fell hard yet again. I think rallies at this point in time still have to prove themselves.
The S&P 500 is approaching the 4800 level again, an area that’s been important a couple of different times, so do pay attention to it. If we were to break down below the 4,800 level, then we could go looking at the 4,500 level. A break above the 5,000 level obviously is very bullish, but I’m really not convinced until we get above 5,300, something that’s not going to happen very easily.
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Chris is a proprietary trader with more than 20 years of experience across various markets, including currencies, indices and commodities. As a senior analyst at FXEmpire since the website’s early days, he offers readers advanced market perspectives to navigate today’s financial landscape with confidence.