- The S&P 500 is nearing a strong resistance at 2900/45 where everything is possible from consolidation phase to profit taking or 7-10% correction.
- Profit taking is possible (FOMC meeting 1 May, US earnings season, ECB meeting 6 June, etc). The risk is that global central banks’ policy U-turn during 2Q19 is largely priced in and markets unlikely to get more softer tone or stimulus from world CBs in nearest futures.
- Back in 2016. With some parallels to 2016 when the Fed also had to be cautious the S&P500 can follow a similar pattern as three years ago. Under such scenario the S&P 500 can set local highs in April and spend half a year consolidating not far from major resistance at 2900-2945
- Although both China and the US are talking up the chances of a possible trade deal, trade tensions remain significant risk for US equities. Besides there are some “landmines” in the implementation and enforcement of a trade deal (Trade war 2.0), uncertainty regarding whether existing tariffs will be rolled back and so on. And with Bloomberg’s “EU-U.S. Trade War Escalates Over Disputed Aviation Subsidies”, on balance, trade war risks remain skewed to the upside.
- Profit taking is possible (FOMC meeting 1 May, US earnings season, ECB meeting 6 June, etc). The risk is that global central banks’ policy U-turn during 2Q19 is largely priced in and markets unlikely to get more softer tone or stimulus from world CBs in nearest futures.
- Back in 2016. With some parallels to 2016 when the Fed also had to be cautious the S&P500 can follow a similar pattern as three years ago. Under such scenario the S&P 500 can set local highs in April and spend half a year consolidating not far from major resistance at 2900-2945
- Although both China and the US are talking up the chances of a possible trade deal, trade tensions remain significant risk for US equities. Besides there are some “landmines” in the implementation and enforcement of a trade deal (Trade war 2.0), uncertainty regarding whether existing tariffs will be rolled back and so on. And with Bloomberg’s “EU-U.S. Trade War Escalates Over Disputed Aviation Subsidies”, on balance, trade war risks remain skewed to the upside.
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There can be overshoot and potential slide of S&P 500 towards support at 2700 or even 2665 (10% correction from record high at 2960) but risky assets can also get some support from Fed meeting on June 19 or G20 Summit on June 28-29.