Tuesday Trade War Worries and Toppy Trading Patterns Persist

Welcome back! 

I hope everyone had a nice vacation.  Seems like nothing particularly blew up over the holiday weekend yet the market gave back 100 Dow points early this morning and we’re back at 25,900 on the /YM Futures and below 2,900 on the /ES Futures and let’s not forget that 2,872 is where we topped out in January and that too was a big run up but then we completely collapsed back to 2,532 for a quick 10% drop in just two weeks.  The high came on Jan 26th, to be exact, and that was AFTER Trump declared a Trade War for the first time that Tuesday. 

This week, Trump has “fixed” Mexico, though many “fake news” analysts say it’s not fixed at all and still no deal with Canada and supposedly (also you have to believe what Trump says) we will be adding another $200Bn of tariffs to China, which would more than double all the tariffs put on all countries combined to date!  Yet the market seems generally unaffected – for now.

That Thursday (Jan 25th), I marvelled at the fact that only 7,826 (11.4%) out of 68,119 investors polled were bearish on the markets as we tested record highs.  Now it’s down to 6,243.  This week’s news cycle will be taken up with Kavanaugh’s Supreme Court nomination hearings but it’s a pretty big data week with ISM and Construction Spending this morning, Auto Sales tomorrow, Productivity, ISM Services and Factory Orders on Thursday and the Big Kahunah, Non-Farm Payroll on Friday.   

September, of course, closes out the 3rd quarter and we have a Fed meeting on the 26th where the Fed is very, very likely to hike rates.  As you can see on this chart, the Fed is still a hike below the average prediction of 2.25% by the end of the year and next year, the target is more like 3.25% so there’s a lot of hiking ahead of us – usually not great for the market.

Trade still seems to be dominating the market talk at the moment.  According to Bloomberg, Trump even gave us a day…

Provided courtesy of Phil’s Stock World.