The S&P 500 opened lower on Monday, marking the lowest levels since mid-January 2024, following an 8.75% drop from the previous week. This decline was triggered by President Trump’s announcement of tariffs on all goods imported to the US, causing widespread panic in global markets.
The index has been on a bearish trend for two consecutive months, currently down 20% from its mid-February all-time high. Despite a slowdown in bearish momentum, uncertainty regarding the tariffs’ economic impact maintains a negative outlook.
Potential Pause for Consolidation
Oversold conditions suggest a potential pause for consolidation, although if circumstances do not improve, selling opportunities may arise. A bear trap pattern is forming around the Fibonacci support level at $4889, indicating possible corrections.
Resistance levels are noted at the $5040 zone, with stronger hurdles at $5179 and $5296. Key support levels include $4889, $4801, $4680, and $4591.
Last week’s sharp fall in the S&P 500, amounting to nearly nine percent, has understandably shaken market confidence. The trigger—an abrupt announcement from Trump about imposing tariffs on all imports—has had a ripple effect well beyond US borders. The resulting slump has pushed the index down to levels last seen in mid-January, a move that extended its two-month stretch of lower highs and lower lows. At this stage, it’s not just a minor correction; the market is officially 20% off its February peak, marking firm steps into a bear market.
Monitoring Market Reactions
We can see that although the downward pace has slightly slowed, markets are still trying to understand how these new trade policies will hit global growth and corporate earnings. The shadow of uncertainty refuses to lift. What stands out right now are the deeply oversold technical conditions. These don’t necessarily promise a rebound, but they do often precede a phase where prices stall, tread water, or even retrace a portion of recent losses. In other words, volatility could fade briefly, offering windows for reassessment—especially for those looking to position near term trades.
As always, levels matter. The Fibonacci retracement area around 4889 is of particular interest, as it’s begun to form what could be a bear trap. This sort of setup can lead to quick reversals if short positions suddenly unwind, but it would require some catalyst—either from economics or policy—to spark that shift. If this zone holds firm under pressure, we may see a move back to 5040, which now sits as the first real resistance to challenge.
Further upward runs would need to battle through deeper resistance—price clusters at 5179 and then again at 5296. These levels previously acted as support or congestion areas when the index pushed to new highs, and they’ve now switched sides, offering barriers to any recovery attempts.
The support picture is more layered. If selling resumes, the initial range from 4889 to 4801 is likely to be tested quickly, while deeper breaks could draw the index towards 4680 or even 4591. What matters is how risk is managed between these zones, as prices oscillate around heavy levels with uncertain drivers.
Given the situation, staying reactive instead of predictive may serve us better. While it’s tempting to forecast the next broad move, we suspect better value lies in observing how price behaves at each of these levels, especially once the headline dust has settled. Stable pricing near support might offer short-term upside trades, but breakdowns at current zones could invite more momentum-based selling.
In the coming sessions, our bias leans towards watching for exhaustion in the sell-off around these technical supports, while keeping a close handle on how trade rhetoric shapes risk appetite.
