Will Tariffs, Trade Concerns Trigger Stock Market Correction?

Brandon Van Zee

The S&P 500 (NYSEARCA: SPY) finished down by 1.65% on fears that the United States could impose tariffs on $200 billion of Chinese imports within the next week.

All eleven sectors finished lower; less than 40 stocks in the entire S&P 500 closed higher.

The Dow Jones Industrial Average (NYSEARCA: DIA) now has a bearish intermediate posture according to the Market Forecast indicator; the other three equity indices retain their bullish intermediate posture for the moment.

While all four major U.S. equity indices have their 10 week moving averages currently above their 40 week moving averages, the price of the Dow Jones is now trading below its 10 week moving average.

The Russell 2000 (NYSEARCA: IWM) is the only index without “3 Red Arrows” because it is still trading above its 30 day moving average.

Fear entered the market and pushed the VIX Volatility Index higher for the second straight day; it was 25% and is now trading at its highest level in over 3 months. INDEXCBOE: VIX

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Mid-Week Stock Market Video – May 7, 2019

Some additional insights from today’s stock market outlook video:

  • Treasury yields fell to 2.44% as traders sought out the relative safety of U.S. Government bonds
  • Traders also took a shine to gold and gold mining stocks on a day when not a whole lot of anything else was working
  • Germany is one of the few foreign markets that maintains their bullish intermediate posture; China fell strongly and is now approaching 3 month lows
  • The Financials are the only U.S. sector that maintains a bullish intermediate posture; the Technology sector was down 2.15% and closed below its 30 day moving average for the first time in over 3 months
  • Our trade application example featured buying a put spread on MRK, which started a new bearish intermediate posture today after a strong bounce from oversold conditions in recent weeks

Twitter:  @BrandonVanZee and @Market_Scholars 

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.