U.S. Stock Market Volatility Driven by Trump's Tariff Stance, Key Levels Identified

In recent days, the U.S. stock market has experienced significant volatility, with fluctuations primarily driven by the shifting stances of U.S. President Trump on tariff issues, leaving many Wall Street investors uncertain. For Daniel Kircher, a technical analyst at Jefferies, this volatility underscores the importance of identifying key levels through chart analysis. He highlights 5500 as a critical point for the S&P 500 index, which must break through this level to recover half of the 19% decline from its February high.

The index, which recently hovered near the bear market threshold at around 5000 points, has since rebounded to 5376 points. A breakthrough above 5500 points, requiring a mere 2% increase from Wednesday's close, would not only erase April's losses but also signal a shift in trading strategy from "selling on strength" to "buying on weakness" for Kircher. He notes that the more the market tests resistance levels, the higher the probability of a breakout, potentially leading to a rebound towards 5800 to 6000 points.

For traders assessing potential downside risks, 4800 points is a crucial level to watch, as it is 3.5% below the April low. Jason Hunt, a strategist at JPMorgan, suggests the market could test this range, possibly even falling to 4500 points, stating that this retest might form a more solid bottom. John Kolowos, chief technical strategist at a macro risk advisory firm, believes 4800 points could act as support, but given recent declines, a drop to 4700 points, or even deeper to 4480 or 4300 points, is more likely.

Traders are also closely monitoring market breadth indicators, as an increase in the number of stocks participating in the rally often suggests a more sustainable trend. Currently, 31% of S&P 500 components are trading above their 200-day moving averages, an improvement from less than 20% in early April. JC O'Hara, chief technical strategist at Roth Capital Partners, hopes to see this percentage approach 50%. Another key indicator is the Relative Strength Index (RSI), which fell below 30 in early April, indicating oversold conditions, but has not yet reached overbought levels during the subsequent rally, suggesting that buying enthusiasm has not peaked.