Chart of the day: why the S&P 500 can stay on track for a follow-up slide

Last week suffered the worst weekly performance this year, but all indications are that this week will be even worse. The index could be on its way to an even bigger sale this week, after confirming last week the major we were warning about more than two weeks ago.

President Donald Trump shocked China and the markets when he announced that 300 billion dollars in Chinese goods would pay 10% rates, just as both China and the market caught their breath in renewed talks. Trump, however, accuses China of violating promises to increase imports of agricultural products to balance trade between the two countries.

Although it may seem impulsive and irrational for Trump to follow this track just after the talks have been restarted, it may be a planned strategy. Fed Chief had lost the central bank due to the effects of the trade war. Trump promised his base a trade war and he has long left the Fed behind. Two birds, one stone.

Trump was openly disappointed with the Fed's 25 basis point reduction, rather than the 50 basis points that some had hoped, and with Powell's clarification that this reduction was nothing more than a "mid-cycle adjustment", not – God prohibit – a policy change.

And so that became Trump & # 39; s sign to shoot the next rate burst.

The S&P 500 has been traded within a broader pattern since January 2018, with highs making higher highs, while lows reaching lower lows. This is a top formation and a sign of chaos, because if investors had confidence in continuous profit, they would trade it in – both with lows and lows. Conversely, if traders expected profits to shrink, they would be sold out – with both lows and lows.

However, the pattern is only complete when the lower limit is exceeded, which is difficult because it continues to fall. In other words, prices have to fall hard and fast to defeat the decline of the lower limit and complete this bearish pattern.

In the meantime, the lines for the short and medium term are up. If this week resumed last week's sale, it would test the medium-term uptrend line since January 2019, while a fall below 2,720 would be the test of the next trend, where the previous two rally's began.

It is reasonable to expect that, given China's retribution. Trump has not shown that he is the kind of man who withdraws from a fight.

Trading Strategies

Conservative traders should avoid this trade and wait until the pattern blows out, take a long position with higher highlights or wait until the completion of the broadening pattern is too short.

Moderate traders are likely to wait for higher highlights – blow out the pattern – for a long position. or wait until the medium term reverses with peaks and troughs in a descending format.

Aggressive traders can enter a counter trade and buy the dip above the upward line and wait until it is broken for a short.

Trade sample

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