Amid Tariff Uncertainty, Key In on S&P 500 Price Action

Core Viewpoint - The article discusses the potential impact of President Trump's tariff strategies on the stock market, particularly the S&P 500 Index (SPX), highlighting the risks associated with his shifting stance as the market recovers from previous declines [1][9]. Market Performance - The SPX is currently trading above its year-end 2024 close of 5,882, the 2024 Election Day close of 5,783, and the pre-Inauguration Day close of 5,995, reaching an all-time high above the February closing high of 6,144 [8]. Tariff Strategies - Evidence suggests that Trump's tariff strategies may become bolder as the SPX recovers, with threats to double tariffs on several countries and impose 50% levies on Canada [5][7]. - The administration's approach to tariffs is closely linked to stock performance, with a potential increase in tariffs expected when stocks are performing well [9][10]. Volatility and Market Sentiment - The Cboe Market Volatility Index (VIX) is at multi-month lows, indicating a calm market despite increasing tariff threats, which may embolden Trump to escalate tariffs further [11]. - A premium of over 15% in the 30-day VIX futures contract compared to the VIX suggests potential underperformance in the market in the following weeks [12]. Short Interest and Trader Optimism - Total short interest on SPX components has increased by 5%, indicating a highly shorted market, yet the SPX has managed gains despite this headwind [16][18]. - Trader optimism is rising, as evidenced by a low VIX reading and a National Association of Active Investment Managers (NAAIM) survey score of 86 out of 100, up from 50 at the SPX trough earlier this year [19]. Support Levels - Potential support levels for the SPX are identified at the former all-time closing high of 6,144 and the rising 30-day moving average, projected to be around 6,130 by the end of the week [20].