Stock markets in the US opened on Monday around the same level as Friday’s close, which marked a week of gains recovering the losses of the previous week. The S&P500 closed at 2905, up 1.21% on the previous week, the DJIA at 26155 (+0.94%), and the Nasdaq at 8010 (+1.39%) in a week in which Apple presented its new products in a presentation that disappointed some analysts. There are renewed threats of sanctions from the US against Chinese imports, with China threatening to stop any further trade talks in the event of new sanctions. This is bad news for global trade and, possibly, for global demand, yet stock markets rose on the belief that the tariffs are being used more as a negotiation tool than as a weapon to unleash a full-blown trade war.
Furthermore, economic and corporate data in the US continue to be consistent with further value creation, the record growth of the stock market notwithstanding.
In this situation, the S&P500 approached its all-time high once again:
After touching the all-time high area, the price has now rebounded downwards and currently seems to be aiming for a new test of the support at 2880 as it trades below 2900 again.
Should this test happen, we could spot a double top formation, which would confirm the divergence we see forming on the indicators.
At that point, the closest dynamic support would be key for the index to start rising again or head to a possible test of the support at 2800-2790.
So far, the index has managed to shake off all the bad news coming from the geopolitical and economic spheres, but a slight loss of momentum seems evident.
Moreover, if we take a look at the Nasdaq, the hypothesis of a correction seems more probable:
The chart shows the index trading below both the static and dynamic supports. A short position here would be possible for the most aggressive trades with a first target of 7200-7195 points. Those seeking confirmation might want to wait for a break below 7380.
