The S&P 500 collapsed 5.97% on Friday, crashing below the 5,100 level as investors reacted violently to Wednesday's Trump tariff announcement. The index is now trading at its lowest levels since April 2024, with futures indicating another 1.8% drop at today's open. However, it has retraced some of its overnight sell-off, indicating a possibility of a rebound or short-term upward reversal.
Investor sentiment has significantly worsened, as shown in the Wednesday’s AAII Investor Sentiment Survey, which reported that 21.8% of individual investors are bullish, while 61.9% of them are bearish.
The S&P 500 accelerated its historic sell-off, as we can see on the daily chart.
S&P 500: Huge Decline Last Week
The S&P 500 sold off by 9.08% last week, accelerating its downtrend following Trump’s tariff announcement on Wednesday. It experienced its worst weekly performance since March 2020.
Previously established support around 5,500 was violated easily, and the severity of this decline suggests.
Nasdaq 100: Tech Stocks Lead Market Crash
The tech-heavy Nasdaq 100 has been hit particularly hard, closing 6.07% lower on Friday and losing 9.77% in a week. Futures indicate that this index will open 2.1% lower today, extending losses after Friday's session. Technical supports have been obliterated. However, a short-term rebound may be coming at some point.
VIX Explodes Above 60 Intraday
The VIX index has surged above 60 intraday, reaching its highest level since August last year and signaling extreme fear in the marketplace. On Friday, it closed above 45.
Historically, a dropping VIX indicates less fear in the market, and a rising VIX accompanies stock market downturns. However, the lower the VIX, the higher the probability of the market’s downward reversal. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.
S&P 500 Futures Signaling Further Weakness
This morning, the S&P 500 futures contract is trading down approximately 1.8%, suggesting continued selling pressure at the open. Overnight trading has been extremely volatile. Current resistance is around 5,000-5,100, with support at 4,800-4,900.
Conclusion
The stock market is experiencing its most severe selloff since the COVID-19 pandemic as investors digest the implications of a global trade war. Key support levels have been violated across all major indices, confirming technical damage that will take time to repair.
Today, stock prices are expected to open lower again, however, more volatility is likely, and rebound attempts are likely to take place.
Here’s the breakdown:
- The S&P 500 continues its sharp sell-off following last week’s Trump tariff announcement and China's retaliation.
- While no positive signals are evident yet, stocks may be nearing a potential short-term bottom
- In my opinion, the short-term outlook is neutral.