U.S. equities had another turbulent day on Friday with a deep selloff. However, yet another tweet from President Trump over the weekend, signalling a possible softening in his approach to a trade war with China, has been improving sentiment. Traders should be aware of a speech by Chinese President Xi Jinping at the Boao Forum on Tuesday, in case of comments about the country’s readiness to retaliate or possibly negotiate in the trade dispute.
This week sees the start of earnings season with JP Morgan Chase and Citigroup being the first big U.S. corporations reporting on Friday. Technology stocks will also be in focus, as Facebook has suspended another data analytics company called CubeYou pending investigations. Moreover, Facebook CEO Mark Zuckerberg will testify before Congress on Tuesday and Wednesday with regards to the Cambridge Analytica scandal.
On the daily chart, the S&P500 (SPX) is trading around the 200MA highlighted in our previous reports. The sustained break of this critical support at 2599 opens the way to the February lows at 2530, with more immediate support at 2550. A break of the February lows could lead to deeper declines to 2490. However, a bullish reversal and close above the 38.2% retracement and falling resistance trend line at 2640 is needed to change the outlook, with further upside resistance at the 50% retracement level of 2675.
On the daily chart, the Nasdaq 100 (NDX) has tested but is still trading above the 200MA at 6310. Immediate support is at 6430 and, if broken, another test of the 200MA at 6310 is possible. A decisive break of this critical level would open the door to a test of February lows at 6160. On the flip-side, a bullish reversal and break of 6630 would lead to further upside resistance at 6740.