We are now considering the upcoming events. The 15% tariffs on $110 billion on Chinese goods on Sunday, the US holiday to give the general population a rest and a bit of optimism as the China Foreign Ministry said that it is maintaining open and positive communication with the Trump administration and is looking for solutions through the lens of mutual respect. But we are positive and optimistic for other reasons. Can the S&P 500 rally from these levels, and how can we confirm a rally?
1. If the post Labor Day holiday brings strong US economic releases in manufacturing and more importantly, on the Friday Payrolls, let`s say 100,000 to 150,000 new jobs created, then markets will view this as a positive release and equity shorts will again be forced to cover. and
2. The short-term confirmation will likely be the break of 2,950 in the S&P 500 – with a significant increase in volume. Keep in mind that some tech and chart specialists are saying that the 2,805 level will test and of course new shorts are following these views. Hence the shorts building at each selloff (and subsequent short-cover rally).
(as a side note, if USDJPY can hold well and move back toward that 107.50 level, then the 20,900 then 21,000 level in Nikkei 225 is possible).