The S&P 500 and Nasdaq 100 plunged after President Trump announced reciprocal tariffs on "American Liberation Day," escalating the trade war. Both indices are now testing yearly lows, with support at 18,798 for the Nasdaq 100 and 5,504 to 5,489 for the S&P 500.
Closing below these yearly lows could confirm a breakout, extending the recent downtrend. If the indices hold their yearly lows, they could rebound towards recent highs in the short term — 19,864 for the Nasdaq 100 and 5,729 for the S&P 500.
The capitulation phase
Markets are deeply oversold, and market sentiment is very bearish; the latest AAII survey shows that bears (61.9%) outnumber bulls (21.8%) nearly three-to-one, potentially signalling a market in “panic mode”.
The contrarian theory would need more extreme positioning to trigger a sell-off or capitulation in the bulls. Achieving this could require a pronounced surge in spot volume, an increase in put trading (put/call ratios above 1.05), and a rise in quoted volatility (with the VIX index above 30%). A deepening of the current correction toward support at September 2024 lows (5,385 for the S&P 500 and 18,308 for the Nasdaq) could trigger these conditions.
A relatively strong Dow Jones
The exception to this rule is the Dow Jones, which shows greater relative strength, holding above its annual low of 40,656. The Dow's composition, with less cyclical and more industrial companies that are less dependent on the foreign sector, could be helping the index in a geopolitical environment trending toward deglobalisation and reindustrialisation.
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