S&P500 Drops on Tariff News, but Recovery Expected
The S&P500 (NYSEARCA:SPY) experienced a significant drop last Friday, its largest one-day decline since April, following President Trump's announcement of a 100% tariff on China. Despite this setback, analysts anticipate a recovery and further growth, with the correction expected to complete and target new all-time highs, potentially reaching the 7000 area.
The recent stock market behavior has been marked by a bearish 'engulfing' bar, indicating a failed attempt at a new high and a substantial drop below the previous two weeks' range. This decline was largely a technical move, with a 300-400 point correction viewed as a 'healthy' part of the larger bullish trend. Key support areas have been identified at 6343-60 and 6450, with the weekly 20sma rising into the 6360 area next week. Initial support for the S&P500 is the August high of 6508, followed by the September low of 6360, and 6147 being the key level for this bull market. However, another drop like Friday's would be needed to reach the 6343-72 area directly, which seems unlikely at present. An upside DeMARK exhaustion signal is in place, and a bounce may occur at some stage. October is shaping up differently from the last four months, with 6764 likely being the high of the month and a bearish bar expected to form. An upside DeMARK exhaustion count is on bar 5 (of 9) in October, meaning there can be no monthly exhaustion signal in 2025.
Despite the recent decline, analysts remain optimistic about the S&P500's prospects. With key support areas identified and a potential bounce on the horizon, the stock market is expected to recover and continue its upward trend, targeting new all-time highs and the 7000 area.
