In the week ahead, we will have lots of economic data from the US and a couple of rate decisions from major central banks, including the ECB and the Bank of Canada, to look forward to. However, all the focus will be on the US-China trade situation after Trump said China has totally violated the trade agreement and that he’s increasing tariffs on steel and aluminium to 50%. With trade uncertainty at the forefront, the S&P 500 outlook could tilt back to bearish after what was a solid month for global stocks markets.

Trade uncertainty back at the forefront, with debt concerns on the rise

The S&P 500 closed Friday’s session flat. But the start of June could be a skiddy one, because after the markets closed on Friday, President Donald Trump said he would be increasing tariffs on steel and aluminium to 50% from 25%, further fuelling investor anxiety. Still, the month of May marked one of the better months for global shares – certainly the best one since November 2023 – as hopes that the worst of the US tariff threat has passed saw investors pile into all sorts of risk assets. However, with renewed concerns about tariffs, and the potential for continued selling of bonds as US lawmakers start negotiating on a sweeping tax and spending bill at a time when there are serious concerns about mounting levels of government debt, the month of June could well be a volatile one as the deadline for increasing the debt ceiling gets closer. Against this backdrop, the S&P 500 outlook is far from rosy.

Technical S&P 500 outlook: Key levels to watch

Source: TradingView.com

Friday’s doji candle on the S&P 500 chart suggests traders were unsure whether to pile in on the long side or take profit and assess the situation in the week ahead. The index has been consolidating over the last few days after running into resistance just below the 6,000 level, which is a psychologically important threshold. This area was previously a major support zone before it broke down during the big drop earlier this year. Naturally, the market is now pausing for a breather. Despite, several short-term bearish signals at the back end of last week, it's too early to say whether the trend has turned bearish again—it could simply be a pause before we see more gains. However, watch for a potential breakdown of the trendline. A closing break below it would put the technical S&P 500 outlook on a negative trajectory.

So, if the index now drops below the trendline, that could trigger some stops and lead to a potential decline. There are several support levels on the way down, including the 200-day moving average, which comes in around 5,785, also a previous high. That area will now be an important support zone to watch.

Below that, we have a shaded blue region where the market previously found support and resistance around the 5695-5730 zone. Now that we’re above it, this area could potentially turn into support again if there’s a drop.

On the upside, resistance at 6,000 is key. Above that, there’s no significant resistance until the February 2025 all-time high.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R