Technical Analysis Points Towards Potential Bear Trend For The U.S Stock Market
The U.S stock market demonstrated a strong bullish performance over the past few months but the bulls might soon lose the battle to the bears according to technical indicators.
The technicals indicate that the bullish trend has already come to an end and this mainly has to do with the concerns caused by the China-U.S trade wars. Analysts believe that the stock market will at any point be triggered, thus confirming what the technicals have already indicated.
The trade standoff between the two countries is still going on and neither of the two sides seems to be willing to budge. It has created a volatile situation which will either cause the U.S stock market to rally or initiate a major bear trend.
The above chart highlights the performance of the S&P 500 large cap index and its performance suggests that a market reversal will soon occur because the trend is about to touch the upper trend line. On the flip side, there has not really been a lot of talks in the investor community about selling or shorting, so a market reversal is not guaranteed. However, the technical analysis are always a welcome early warning of what might be about to happen.
Meanwhile, investors should exercise caution, especially at such uncertain times because they may end up falling into bull traps or bear traps set up by the markets. These are situations where the market gives false reversal signals and that might be the case with the current market conditions.
U.S-China tensions are a potential trigger
The currently ongoing tensions involving trade tariffs between China and the U.S have promoted an opinion that equities and other commodities are now riskier. Such opinions have a history of impacting the markets especially and the lack of a trade deal from the recent talks between the two countries further fuels concerns.
The Federal register revealed on Wednesday that there are plans to slap additional tariffs on Chinese imports from the current 10% to 25%. The change might be implemented as soon as Friday and was reportedly suggested by U.S president Donald Trump. The move was contrary to what investors expected, thus raising concerns about the impact of the additional tariffs on the markets.
It, however, seems that the hopes of a trade deal might not be over. Trump revealed that Chinese officials scheduled a meeting for Wednesday with U.S officials. The goal of the meeting is to try and come up with a deal. The trade wars have definitely led to economic uncertainties in the U.S but more so in China where the industrial sector has suffered a huge hit.
The U.S stock market has been on a strong bull run since the start of 2019 and of course, the surge will not last forever. Analysts, therefore, expect a reversal to take place sometime soon since what goes up must come down. The ongoing market pressures both internal and external plus the technical performance should eventually hand over control to the bears.