Weekly Stock Market Update & SPY Technical Analysis
Tariff fears are driving markets again, forcing U.S. equities to post their worst performance since April of this year. The sell-off wiped $1.5 trillion in market value across the market, with technology stocks leading the way down.
What exactly happened?
On Friday, Trump posted on Truth Social that China had been sending letters to countries across the world warning them that it would impose export restrictions on “each and every element of production having to do with Rare Earths, and virtually anything else they can think of.” He described the move as “shocking” and “hostile,” saying it “came out of nowhere” and alleging that other nations had already reached out to tell the U.S. they were angry at what he called Beijing’s sudden trade hostility.
Trump is claiming that China is holding the world captive through this move, highlighting that these metals and magnets used in electronics, computer chips, lasers, jet engines, and other technologies. For months now, the U.S. has had a big push to boost domestic mining, but China still controls 70-90% of the market, making this a matter of national security.
In reaction to this, Trump imposed 100% tariffs on all Chinese imports starting November 1st, also stating that the U.S. would impose export controls on “any and all critical software.”
Although China is not our biggest trading partner, China remains the largest single source of U.S. imports of manufactured goods, particularly electronics, machinery, and consumer products, and still a vital player in global supply chains, even if total trade volume has fallen behind North American partners like Mexico and Canada.
What now?
Markets were already stretched in “overbought” territory, so it didn’t take much to trigger a wave of profit taking. When valuations are elevated, even a single negative headline can act as a spark, and Friday was a textbook example. The magnitude of the sell-off suggests that this may not be the end of the pullback, especially with geopolitical tensions between the U.S. and China still unfolding.
Beyond trade fears, investors are also contending with an ongoing government shutdown, a weakening labor market, and the looming earnings season. The lack of fresh economic data due to the shutdown only adds to the uncertainty. Combined, these factors have created the perfect mix of caution and confusion, a backdrop where locking in profits feels safer than chasing new highs…at least for now.
Our take:
We welcome this pull back with open arms. Good set-ups were getting harder to find as names nearly turned vertical and valuations became stretched. We are still bullish on the market, but some more downside to retest previous breakouts and create new ranges is seen as a good thing by seasoned traders and investors. With earnings season kicking off, we’ll be watching for the industries and companies that report the strongest data and focusing on creating entry points for them over the coming weeks. We’ll share our findings in our weekly watchlist analyses.
SPY Technical Analysis:
Prior to the April-May correction, the market topped out around 613.00 and wasn’t able to break above that level till late June; however the breakout above that point was never “retested.” While we don’t usually lead with technicals, this is a technical point to focus on because it could be the level that SPY settles at before recovering from this short-term pull back. We won’t necessarily head straight down to it, but we may inch lower over the coming weeks and start to form a base as we get closer to the point. As this happens in the index, we’ll see other stocks that are stretched out also retesting previous levels and building a new base before markets get ready for another leg up.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of capital. Always do your own research or consult with a licensed financial advisor before making investment decisions.