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27.05.2025 11:56 AM
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The wave structure on the 24-hour chart for the #SPX instrument is generally easy to interpret. The global five-wave pattern doesn't even fit within the terminal window at the smallest scale, so long has the U.S. stock market been rising. At the moment, the upward section of the trend appears to be complete. In my opinion, we will likely continue to see a prolonged corrective wave series, as the current corrective phase of the trend doesn't look particularly convincing. I would prefer to see a more distinct three- or five-wave structure.

On the 4-hour chart (shown above), we see a completed three-wave downward structure followed by a strong rally. Without a doubt, this rally constitutes an upward movement within the trend, but despite its strength, I cannot classify it as impulsive. The first wave was itself a three-wave pattern (a-b-c), and the second wave followed suit. Therefore, I am inclined to believe that we are observing a series of corrective structures that has already clearly dragged on. I do not believe the decline in the S&P 500 is over.

The #SPX instrument has recovered approximately 80% of its value since the most recent crash. Yet the news background hasn't changed much in recent weeks. In the first quarter, market participants were selling off shares of U.S. companies due to fears of a recession, declining corporate profits, mass layoffs, rising unemployment, and other unpleasant scenarios that could result from the new White House administration's policies. In recent weeks, however, these concerns have ceased to trouble buyers. Donald Trump's policies remain unchanged, and any gestures toward de-escalating the trade war appear unconvincing. Negotiations with various countries are ongoing, but Washington has only one actual trade deal in hand. Therefore, nothing in recent weeks would reasonably have motivated investors to buy aggressively.

Only attractive prices could have served as a strong reason for purchasing. Moreover, foreign investors are paying less and less attention to U.S. government bonds or American equities. Donald Trump has launched attacks on Apple, threatening to impose 25% tariffs on all products made in China. And knowing Trump, this is a very real possibility. He knows no other method of achieving his goals than the "stick." The words "carrot" and "incentives" are missing from his political vocabulary. Trump fails to understand that negotiations "at gunpoint" cannot be productive. He simply forces his "targets" to act as he wishes—but these "targets" will only become more determined to find ways to bypass him altogether.

Apple is already prepared to relocate its factories to India or another country—anywhere but the U.S. If Trump gets his way, the prices of Apple products will rise severalfold. Revenues will plummet, as few in the world will be willing to buy an iPhone for $2,000–$3,000. Who benefits from that?

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General Conclusions

Based on the analysis of #SPX, I conclude that the instrument has completed its upward trend segment. Trump continues to pursue a course that threatens the stability of both the U.S. economy and American companies (trade wars, tariffs, export restrictions). We have seen strong buying at attractive price levels, but now the market needs real reasons to form a new upward trend segment. Therefore, I believe the corrective phase of the trend is not yet complete, and I am preparing for a new decline in the index, with targets around the 4800 level.

On the higher time frame, the wave structure is fairly straightforward: a clear five-wave pattern with another five-wave pattern inside the fifth wave. The upward trend is complete. Accordingly, I am preparing for a new downward trend phase, despite the recent strong rally in the index.

Core Principles of My Analysis:

  1. Wave structures should be simple and understandable. Complex patterns are difficult to trade and often prone to changes.
  2. If you're not confident about market conditions, it's better to stay out.
  3. There can never be 100% certainty in market direction. Always use protective Stop Loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.
Chin Zhao,
Analytical expert of InstaForex
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