Tariffs on 200B? Trend in US Equities Still Bullish
Hello friends,
As news leaked about concrete plans to put tariffs on 200B worth of Chinese goods in an escalating trade war, equity futures plunged.
But this is not new news. "Tuesday's action makes good on a threat President Donald Trump made last month. He directed Lighthizer to identify $200 billion in Chinese goods for tariffs if China retaliated against US penalties that are meant to punish the country for intellectual property theft." It also appears these tariffs would be implemented sometime in August, after a period of consultation with industry as which products they should be imposed on...at least this is what I thought I heard on Bloomberg TV. It's still a bit early to get extremely concerned, and a strong market should not be too damaged by these revelations I reason. A weak market on the other hand would wait for resolution.
Thus I think the market reaction may be a bit overdone. We are currently seeing a recovery after a bounce around the 0.382 fib level of the current trend on the futures. This is exactly what I would expect in a strong uptrend...it's important the decline does not significantly violate the 0.5 retrace level from my experience, and the 0.382 retrace is perfect for a trend which still has significant strength. It's also important to see some decline, as these allow the markets to cool off and prepare for the next leg up. These declines also become places where I generally anchor my stop loss in anticipation of continuation.
For the moment, despite this weakness, it does appear the current uptrend is still in force. However I do have my stop loss below this 0.382 level (currently long) and as much as the FOMO is suggesting I move it below the 0.5 retrace to be 100% sure I don't get stopped out of the move, logically, keeping it here seems to make the most sense to me. After all, protecting profits/limiting losses is extremely important, and there's no telling with certainty what the markets will do.
And of course, if you're not long, this may be a good buying opportunity. As always, time will tell.
As news leaked about concrete plans to put tariffs on 200B worth of Chinese goods in an escalating trade war, equity futures plunged.
But this is not new news. "Tuesday's action makes good on a threat President Donald Trump made last month. He directed Lighthizer to identify $200 billion in Chinese goods for tariffs if China retaliated against US penalties that are meant to punish the country for intellectual property theft." It also appears these tariffs would be implemented sometime in August, after a period of consultation with industry as which products they should be imposed on...at least this is what I thought I heard on Bloomberg TV. It's still a bit early to get extremely concerned, and a strong market should not be too damaged by these revelations I reason. A weak market on the other hand would wait for resolution.
Thus I think the market reaction may be a bit overdone. We are currently seeing a recovery after a bounce around the 0.382 fib level of the current trend on the futures. This is exactly what I would expect in a strong uptrend...it's important the decline does not significantly violate the 0.5 retrace level from my experience, and the 0.382 retrace is perfect for a trend which still has significant strength. It's also important to see some decline, as these allow the markets to cool off and prepare for the next leg up. These declines also become places where I generally anchor my stop loss in anticipation of continuation.
For the moment, despite this weakness, it does appear the current uptrend is still in force. However I do have my stop loss below this 0.382 level (currently long) and as much as the FOMO is suggesting I move it below the 0.5 retrace to be 100% sure I don't get stopped out of the move, logically, keeping it here seems to make the most sense to me. After all, protecting profits/limiting losses is extremely important, and there's no telling with certainty what the markets will do.
And of course, if you're not long, this may be a good buying opportunity. As always, time will tell.