S&P 500 and Dow Jones Outlook: US-China Trade War Truce Sparks Rally

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Equity Analysis and News

  • S&P 500 | 2800 Revisited on Trade War Truce
  • Dow Jones | Scope for Pullback to Key Fibo

Risk sentiment has been buoyed amid the trade war truce between the US and China, following the G20 summit. Both President Trump and Xi agreed to hold off on further tariff measures. This will entail the US refraining from increasing the tariff rate on Chinese goods to 25% from 10% in January, while China has agreed to not only purchase more agricultural products, but to also reduce and remove tariffs on American cars.

S&P 500 | 2800 Revisited on Trade War Truce

In reaction to the fallout out of the trade war truce between the US ad China, S&P 500 is called to open sharply higher with futures. As highlighted last week, a positive G20 update should see S&P 500 move to 2800. However, while the trade war truce deescalates the trade war backdrop, the picture remains largely the same with global growth slowing. The S&P 500 rise has been curbed by the 61.8% Fibonacci retracement (2811) which also roughly coincides with the double top formed from the October 18th and November 8th peaks. Support is situated at 2760-70.

S&P 500 Price Chart: Daily Time Frame (May – Dec 2018)

S&P 500 and Dow Jones Outlook: US-China Trade War Truce Sparks Rally

Dow Jones | Scope for Pullback to Key Fibo

Similar to the S&P 500, the Dow Jones has been boosted by the upbeat risk appetite. Consolidation above 26000 needed to increase scope for a push towards resistance at 26283, which marks the 76.4% Fibonacci retracement. Failure to hold above 26000 leaves the index vulnerable to test 25500.

Dow Jones Price Chart: Daily Time Frame (May – Dec 2018)

S&P 500 and Dow Jones Outlook: US-China Trade War Truce Sparks Rally

Chart by IG

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