The S&P 500 is eyeing the important thing resistance zone once more because the market stays optimistic

The S&P 500 continues to fade negative news and rally strongly on positive developments. This is a signal that the market is looking forward to more de-escalation and eventually trade deals as Trump continues to cave in.

We bottomed on April 9 when we reached the peak in escalation and Trump paused the tariffs for 90 days. From there on, it was starting to look clear that the downside became limited, and the upside was the most likely path forward.

There’s too much at stake and Trump’s actions showed clearly that there is a pain threshold. The markets can be a great constraint for policymakers which eventually have to reverse or change course to fix the damage. Of course, the markets need to find that pain threshold before pricing in the eventual change.

On the daily chart, we can see that the S&P 500 bottomed right near the key support zone around the 4800 level which had the confluence of a major trendline and the 2022 high. The price is now coming back to retest the key resistance zone around the 5510 level where we have the downward trendline for confluence. That’s where we can expect the sellers to step in again to position for a drop back into the support. The buyers, on the other hand, will look for a break higher to invalidate the bearish setup and increase the bullish bets into a new all-time high.

On the 1 hour chart, we can see that we bounced right around the recent low at 5145 and eventually rallied on the positive Treasury Secretary Bessent’s comments that unfortunately were delivered at a private JP Morgan client event. Anyway, the positive Trump’s comments late yesterday triggered another rally with the futures market opening higher leaving behind a gap.

Maybe, we close that gap if the price pulls back to the minor upward trendline where we can expect the buyers to step in with a defined risk below the trendline to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 5145 level next.

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