The U.S. benchmark index was under pressure most of the session on Wednesday as investors responded to a veiled threat from China over rare earth exports that raised tensions in the U.S.-China trade dispute. Investors also responded to another plunge in U.S. Treasury yields which increased worries about a potential global economic slowdown.
On Wednesday, June E-mini S&P 500 Index futures settled at 2780.00, down 25.00 or -0.90%.
Lower yields put pressure on bank stocks which drove down the banking sector. The retail sector was also weaker as investors dumped stocks of major retailers expected to be most affected by the new tariffs.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Wednesday when sellers took out the May 14 main bottom at 2799.75. A trade through 2894.00 will change the main trend to up.
Thursday is the ninth day down from the last main top at 2894.00. This matches the previous break in time from May 1 to May 14. If time balances then we could see a two day counter-trend rally. If time overbalances then look out to the downside. A balance in price makes 2732.50 a new target.
The main range is 2726.50 to 2961.25. Its retracement zone at 2816.25 to 2844.00 is resistance. This zone is also controlling the near-term direction of the market.
The major retracement zone 2716.00 to 2640.25 is the primary downside target. This zone represents value so buyers could come in on a test of this area.
Daily Swing Chart Technical Forecast
Momentum is clearly to the downside with short-term resistance the former bottoms at 2789.50, 2799.75 and 2816.25. Tests of these levels could attract new selling since old bottoms tend to become new tops.
If the downside momentum continues then look for a potential acceleration into the swing chart target at 2732.50, the main bottom at 2726.50 and the Fibonacci level at 2716.00.
The major downside target is the 50% level at 2640.25.