The S&P 500 falls to new lows as risk aversion dominates: Will we get another TACO trade?

S&P 500 Decline and Risk Aversion

The S&P 500 futures opened lower following President Trump's comments about Greenland over the weekend. He threatened to impose 10% tariffs on several European nations starting February 1, with a potential rise to 25% by June 1 if no deal is made. This kind of risk-off behavior has been seen in the past when growth expectations wane, leading to selling pressure in the markets. Traders are now eyeing the "TACO" trade, as the market is highly sensitive to Trump's moves and statements. The risk sentiment will likely remain defensive until there is clear de-escalation from Trump.

Technical Analysis

Daily Timeframe

On the daily chart, the S&P 500 is breaking below the key swing level around 6,865, indicating a likely selloff towards the next swing level at 6,770.

4-Hour Chart

On the 4-hour chart, a downward trendline suggests bearish momentum, where sellers may look to lean on this trendline on any pullbacks.

1-Hour Chart

On the 1-hour chart, sellers may find opportunities near the 6,885 level or at the trendline, while buyers will also look for breakout opportunities above this level.

Upcoming Catalysts

Key events to watch include the weekly US ADP employment data and Trump's speech regarding Greenland, which could impact market sentiment significantly.