S&P 500 gaps lower on Trump tariff threat

Another round of tariff rhetoric from President Trump pressured U.S. equities, pushing the S&P 500 (SPX) sharply lower.

The SPX gapped down 2.1% on Tuesday, January 20 following a tariff threat aimed at eight European nations tied to a Greenland-related deal. The selloff drove the index decisively below its 13-, 26-, and 40-day moving averages (DMAs) at 6916–6852, leaving behind a large downside gap. This gap, spanning roughly 6871 to 6925, is likely to act as near-term overhead resistance, along with the broken DMAs (6916-6852), ahead of the index's January 12 all-time high at 6986.33.

Importantly, the decline also broke tactical support at the January 2 low of 6824. This shifts downside focus to the mid-December low at 6720, which represents the last meaningful support before the more critical 2026 support zone at 6550–6521. The 6550 level marks the “Trump tariff tweet” low from early October, while 6521 corresponds to the post-NVDA earnings low from late November.

From a sentiment perspective, the 3-month VIX relative to the VIX is a sentiment indicator that shows increasing tactical fear on the drop to 1.06. Mild oversold spikes below 1.0 suggested tactical panic and provided tactically bullish signals in mid October and late November.

Chart 1: S&P 500 (top) and the 3-month VIX relative to the VIX (bottom)