S&P 500: TACO Trump or Something More Serious?US 500CAPITALCOM:US500CapitalcomAfter a summer of plain sailing for the S&P 500, Friday’s sell-off was the first market wobble we’ve witnessed in some time. Let’s take a look at what this means moving forward… Tariff Turbulence Returns Donald Trump’s latest tariff threats against China sent shockwaves through markets on Friday, triggering the S&P 500’s biggest one-day drop since April. His comments, accusing Beijing of becoming “very hostile” and vowing “massive” tariffs, reignited fears of a full-blown trade war. Investors rushed into safe havens, pushing Treasury yields lower and sending gold back toward record highs. The sell-off saw more than four in five stocks in the index finish in the red, bringing an abrupt pause to the market’s recent record-breaking run. But as Wall Street traders know, Trump’s tariff threats don’t always end the way they start. The “Trump Always Chickens Out” or TACO trade has become a familiar playbook for traders who buy the dip after a tariff announcement, then sell the rebound when the president softens his tone. Sure enough, over the weekend Trump hinted at reconciliation, praising President Xi and calling for cooperation. That shift helped US futures rebound early Monday, as investors once again bet that the sell-off might be more bark than bite. The question now is whether this episode follows the usual TACO script or signals something deeper brewing beneath the surface. Bearish Engulfing Shock Sets the Parameters Friday’s daily candle tells the story best. The huge bearish engulfing candle didn’t just erase the prior week’s gains, it wrapped around several days of price action and signalled a sharp shift in sentiment. Its sheer size is significant because range expansion after a calm period often marks a turning point in market psychology. The candle’s lower wick, finding support near the 50-day moving average, shows that buyers did emerge at key trend support, but how price behaves within this range will now define the path forward. US500 Daily Candle Chart Past performance is not a reliable indicator of future results The hourly chart shows how that panic played out and how quickly traders have tried to repair the damage. The market found support before gapping higher at Monday’s open, showing a tentative attempt to stabilise. This kind of response often reveals whether a sell-off was a genuine trend reversal or a momentary flush of emotion. If price can keep grinding higher from here and close back above the midpoint of Friday’s engulfing candle, it would confirm that the uptrend remains intact and that buyers still have control. However, if the S&P 500 stalls or consolidates in the lower half of that candle’s range, it would be a clear warning that the market’s tone has changed. Sideways price action here would imply that traders are waiting for confirmation rather than chasing rebounds, and that shift in behaviour can often lead to a second leg lower. The size of Friday’s engulfing candle now marks a battleground between short-term buyers and cautious longer-term investors. Whether we see a swift recovery or a slow grind will reveal if this was just another TACO moment or the start of something more meaningful. US500 Hourly Candle Chart Past performance is not a reliable indicator of future results Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.24% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.