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s&p 500 outlook: us-china tensions rise

(thu, 7 may 2020). the s&p 500 is back at to near term resistance situated at 2888. despite the recent step-up in tensions between the us and china, us equities have remained rather sanguine. that said, we believe one of the key reasons for this has been due to the chinese yuan’s (cnh) stability throughout this week with the currency benefiting from local bids during the asia session. us-china tensions will be a continuous theme in the run-up to the us election, however, the question is when those risks will see a sharp escalation. we look to the chinese yuan (usdcnh) as the key barometer for us-china fears.

headline risk on the rise as us and china talk things out
reports this morning noted that us-china trade officials will be on a call next week, after president trump stated that he will provide an in the next week or two on whether china is living up to its trade deal promises. the risk here is that with president trump also stating that china may or may not keep the trade deal, trump may look to take retaliatory actions against china.

s&p 500 technical levels
while the s&p 500 at is at near-term resistance (2888) a break above could put the index on course for the 61.8% fib at 2933. however, we ultimately expect upside to be capped, particularly at 2990-3000. on the downside, support is seen at 2800 with the 50% fib slightly below at 2790. with that said, a break below 2728 would be needed to confirm a bearish breakdown, as it stands the s&p 500 remains somewhat range-bound.


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