The trade war between the U.S. and China is escalating with no end in sight, increasing the likelihood that the stock market will be gripped by high volatility and sharp plunges for the foreseeable future, according to several investors and market watchers. In recent months, many of the major moves in the market have correlated with new developments in the trade conflict, or shifting expectations about its future course and the likelihood of a timely resolution.
“It is possible we will still see trade volatility and trade tensions all the way up until the election, because it is a strong political position,” David Kelly, chief global strategist at JPMorgan Asset Management, told The Wall Street Journal. In a bearish sign for technical analysts, both the S&P 500 Index (SPX) and the Dow Jones Industrial Average (DJIA) dipped below their 50-day moving averages earlier this week. However, both indexes have remained above their 200-day averages, and the S&P moved just above its 50-day average by early afternoon Thursday, as detailed in the chart below.
Technical Indicators Hover Near Bearish Levels
(As of 12:45 PM Eastern Time, May 16, 2019)
Current value: 2,887 50-day moving average: 2,867 200-day moving average: 2,776
Dow Jones Industrials
Current value: 25,920 50-day moving average: 26,062 200-day moving average: 25,426
Significance For Investors
A positive technical sign is that, in addition to the S&P 500 as a whole being above its 200-day moving average, so are 58% of the stocks that constitute it, per analysis by Dow Jones Market Data cited by the Journal. While this is above the 39% figure at the end of 2018, it nonetheless is sharply below the recent high of 73% reached in April.