Forex Analysis & Reviews: 29.04.2025 - The Stock Market Rally...

29.04.2025 11:17 AM

The Stock Market Rally Should Not Be Misleading

The wave pattern on the 24-hour chart of the #SPX looks generally clear. The global five-wave structure doesn't even fit into the terminal window at its smallest scale. In simple terms, U.S. stock indices have been rising for a very long time. And we know that trends alternate. Currently, the bullish segment of the trend appears to be completed. The instrument made four unsuccessful attempts to break above the 6093 level, which corresponds to 200.0% of Fibonacci wave 4. In my view, we are likely to see an extended corrective wave series. The U.S. stock market has been overheated for too long, and Trump has triggered a chain reaction.

Switching to the 4-hour chart (see image above), we can observe the formation of a new downward segment of the trend, which may turn out to be quite prolonged. Wave 5 is still missing from the structure, so I believe the S&P 500's decline is not over. It's also important to keep in mind that any new tariffs imposed by Trump or retaliatory tariffs against the U.S. could easily trigger new selloffs in the American stock market. The construction of the presumed wave 4 is not yet complete, and it may turn out to be quite complex internally.

The #SPX has bounced back strongly, but the downward segment of the trend remains incomplete. There are simply too many looming problems in the U.S. economy. I see no signs of resolution in the global trade war. From time to time, there are reports that various countries are in talks with the U.S. about trade deals, but these developments are not what markets are truly looking for. What the market wants is de-escalation of the trade war with the European Union and, especially, with China.

We should also note the increasing likelihood of economic deterioration in the U.S. These days, it seems everyone is predicting a recession. And a recession means a shrinking labor market, rising unemployment, and accelerating inflation. Many economists believe the Fed will rush in to save the U.S. economy, but I think that conclusion is far from certain. Jerome Powell has already stated multiple times that no conclusions about economic shifts should be made before summer or even fall. Therefore, no monetary policy easing is expected in the near term. Furthermore, Powell views inflation as the FOMC's top priority, which casts doubt on whether we'll see any rate cuts in 2025 at all. Forecasts that Trump's tariffs will only cause a mild and temporary rise in inflation are just speculation. Let's not forget that in the post-COVID era, very few expected consumer prices to surge by 10% per month. As a rule, expectations and reality often diverge dramatically.

Based on all of the above, I do not believe the S&P 500 is at the beginning of a new bullish trend.

General Conclusions

Based on the #SPX analysis, I conclude that the bullish segment of the trend is complete. Trump continues to make decisions that threaten the stability of the U.S. economy and American companies (trade wars, tariffs, import duties, export restrictions), which is why we are now observing the emergence of a new downtrend. The "bubble" in the U.S. stock market had been inflating for years, and Trump has now popped it. The 4-hour chart also suggests further downside. Currently, wave 5 is expected to form, which implies a new decline toward the 4,614 level.

At the higher timeframe, the wave pattern is much clearer: a well-defined five-wave structure with a five-wave substructure inside the fifth wave. The bullish trend segment is over. Accordingly, I would prepare for a new bearish trend segment, which has already begun.

Core Principles of My Analysis:

Wave structures should be simple and understandable. Complex patterns are hard to trade and often lead to revisions.
If you're uncertain about what's happening in the market, it's better to stay out.
Absolute certainty about market direction does not and cannot exist. Always use protective Stop Loss orders.
Wave analysis can be combined with other forms of analysis and trading strategies.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.