The year has started very well for equity markets amid cautious optimism over the prospects for a trade deal between the U.S. and China. To this respect, Present Trump tweeted that the latest discussion between the two countries are ‘going very well”.
During the last couple of months, we have all been hearing that a recession is on the way and that would mean that markets will start heading downwards. At the moment the US economy is still thriving with a record low level of unemployment and strong economic growth and thus such scenario still needs a long way to go.
Having said that and although optimism has resurfaced during the past weeks, we are now at a point of a make or break on the equity market. As we can notice from the chart below, the S&P 500 is currently close to a point which acted as support in Feb and March of last year, when the initial trade war turmoil started. The same support was broken last month and we now have to wait and see if this break-out was just temporary, or if this was a bull trap and the start of a new bearish resistance.
Should this be the case, it would be an interesting opportunity to gain by shorting the index.