S&P500 Plunges on Tariff News, Bounce and Drop Expected
The S&P500 (NYSEARCA:SPY) experienced its largest single-day drop since April last Friday, following President Trump's announcement of a 100% tariff on China. This significant decline, which marked the end of nearly five months of upward trend, has set the stage for a complex market trajectory in the coming weeks.
Technical indicators suggest a bounce is likely at some point next week, followed by a further drop later in October, potentially reaching the November 1st tariff date. The ideal target for this drop is the key support area of 6343-672. This move is considered a 'healthy' part of the larger bullish trend, following a brewing correction of 300-400 points.
The weekly chart shows a bearish 'engulfing' bar, indicating a failed new high and a substantial drop, which could test the 6500 level. The monthly chart suggests that the next major upside target is 6958, with initial support at 6508 and 6360. The weekly 20sma is expected to rise into the 6360 area next week, with temporary support likely around 6450.
October is anticipated to make its high early in the month, with 6764 being the projected peak, before moving lower in the second half. Earnings season, starting next week, may have a more significant impact than usual due to the lack of other economic data.
In summary, the S&P500 is expected to bounce at some stage next week before resuming its downward trajectory, potentially reaching the key support area of 6343-672. The market reaction to President Trump's tariff threat was overdone, speeding up the correction process. Traders should closely monitor earnings reports next week and be prepared for increased volatility as the market navigates the late stages of its current trend.
