Equities plunge as trade war truce is broken by both sides

Intermediate
  • From the start of May and the Trump threat for higher tariffs on Chinese goods we have been highlighting intermediate-term topping threat for the major European and US equity averages, as highlighted here.
  • As we highlighted in yesterday’s report, further tweets over the weekend from Trump “have again fuelled the fire of market unease”, whilst retaliatory tariffs from China on US goods have sent global equity markets and indices plunging to new multi-week lows.
  • In today’s article we spotlight the German flagship average, the DAX and again the US benchmark index, the S&P 500.

DAX intermediate-term shift to neutral; downside threat

We have stated in May reports to clients that “the early April push through a key resistance at 11640 shifted the intermediate-term outlook back to bullish BUT with risk growing for a push below 11866.5/863 for an intermediate-term shift to neutral, maybe to bearish below 11675” and the break below the higher area set an intermediate-term range as 12337 to 11675, with risk to the lower level.

Furthermore, the Monday plunge switches immediate risks back lower for Tuesday.

For Today:

  • We see a downside bias for 11837.5; break here aims for 11784 and key 11675, maybe the bull gap at 11601.5-570.
  • But above 11933 opens risk up to 11983, maybe 12107.

Intermediate-term Range Breakout Parameters: Range seen as 12337 to 11675.

  • Upside Risks: Above 12337 sets a bull trend to aim for 12873 and 13000.
  • Downside Risks: Below 11675 sees a bear trend to target 11285, 11000/10900 and 10701.5.

 4 Hour Chart

DAX Chart

S&P 500 E-Mini intermediate-term bear shift threat to key 2789.5

A Monday plunge wiping out positive pressures from Friday’s dip and recovery and Hammer candlestick, below the 2826.0/21.25 support area and 2813.75, re-energizing downside forces from the intermediate-term top from the start of May, flipping risks back lower for Tuesday.

The early May push below key 2877.25 support sets an intermediate-term range we see as 2789.5 to 2961.25, BUT with risk growing for a push below 2789.5 for an intermediate-term shift to bearish.

For Today:

  • We see a downside bias for 2800/2799.75; break here aims for key 2789.5, then towards 2775/74, maybe 2755.5.
  • But above 2830/31 opens risk up to 2865.5.

Intermediate-term Range Breakout Parameters: Range seen as 2789.5 to 2961.25.

Upside Risks: Above 2961.25 sets a bull trend to aim for 3000.0.

  • Downside Risks: Below 2789.5 sees a bear trend to target 2726.5, 2686.0 and 2627.75.

4 Hour Chart

SP500 Chart

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