The S&P 500 broad market index futures
rose by 2.5% to 6,642 points on Monday, recovering after a sharp decline on
Friday when the benchmark plunged 3.5% to 6,495 points in a single session, its
lowest level since 9 September. More importantly, the path toward the upside
extreme target of 6,900–7,000 has been blocked, shifting sentiment to the
downside. The base target in the new bearish formation lies at 6,380–6,480
points, and given the large price gap at 6,508, another attempt to revisit this
level appears likely in the near term.
On Thursday, China’s Ministry of Commerce
tightened export controls on rare earth metals, imports of which are essential
for U.S. high-tech and defence industries. In response, U.S. President Donald
Trump reactivated his tariff threats, announcing the possibility of an
additional 100% duty on Chinese goods effective 1 November. Similar measures
threatened earlier this year, between March and April, triggered a 19% decline
in the S&P 500 over two months, and Friday’s sell-off became the steepest
since April.
Over the weekend, Trump sought to calm
markets, softening his earlier tone. His statement about cancelling a meeting
with Chinese leader Xi Jinping at the upcoming APEC summit was later
reinterpreted as being still possible. According to the U.S. president, there
remains “plenty of time” before the November deadline, and Xi is his “friend.”
Shortly afterwards, however, Trump reiterated his intention to raise tariffs,
adding to the uncertainty. Only his closest advisers appear able to follow the
shifts in his trade rhetoric. Rumours also circulated that large short
positions in cryptocurrencies were opened just hours before Friday’s
announcement. China, for its part, responded cautiously, with its Ministry of
Commerce urging Washington to abandon tariff escalation “as soon as possible.”
Markets are now preparing for a potential
second leg down in the S&P 500 index. Logically, this move could occur on
Monday, closing the existing gap and reaching the primary downside zone at
6,380–6,480 points. During this phase, further statements from Trump may
emerge, either intensifying the sell-off toward the extreme downside target of
6,050–6,150, or easing pressure and stabilising sentiment. Should reassurance
come from Washington, attention will likely turn to the start of the U.S.
third-quarter earnings season, beginning with banks, which investors approach
with cautious optimism.
Fed Chair Jerome Powell is due to speak on
Tuesday, and his remarks may reflect growing concerns over trade tensions while
offering subtle hints regarding inflation trends, which some expect to be
released midweek despite the ongoing government shutdown. If disinflationary
tendencies are confirmed, Powell may choose to downplay them in light of
current market volatility.
Large investors have not yet turned into
sellers. The SPDR S&P 500 ETF Trust (SPY) reported net inflows of $740.8
million, lower than the $4.26 billion seen earlier last week but still
positive. This suggests that major players may interpret Friday’s decline as a
temporary correction. For a firm bullish reversal, renewed large-scale buying
would be required, which remains unlikely at present levels. Another downward
move could provide greater clarity on market direction.
From a technical perspective, the S&P 500
has shifted from a bullish to a bearish formation, with a primary downside
target of 6,380–6,480 points. The current level stands at 6,642, and to
invalidate further declines, the benchmark must remain sustainably above 6,700.
In the oil market, the technically
unfavourable phase continues and is expected to persist until the end of
October. On Friday, Brent crude prices broke below support at $65.00 per
barrel, and a retest of this level is now needed. The decline could extend
toward $55.00–$57.00, close to the final bearish target of $45.00–$55.00.
Gold prices reached a new all-time high at
$4,079 per troy ounce, holding well above the previous extreme target of
$3,850–$3,950, signalling overheating conditions. Overbought levels remain
historically elevated, yet premature short positions remain risky. If
U.S.-China trade tensions persist, even in a moderated form, demand for
safe-haven assets such as gold may continue. A confirmed and sustained reversal
pattern would be required before bearish positions become justified.
In the currency market, Friday brought a sharp
rebound. The EURUSD pared its weekly decline to 0.99%, recovering to 1.16250
from a 1.68% drop to 1.15410. The pair is now retracing slightly, though
Friday’s momentum may mark the beginning of a move toward closing the gap at
1.17380. No clear direction has yet emerged, with both a rally above 1.19000
and a drop below 1.15000 remaining possible. A sustained break above
1.17600–1.17800 would confirm a return to bullish momentum.