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Daily State Of The Markets: 'Tariff Tantrum' Triggers The Retest Phase

David Moenning profile picture
David Moenning


  • It is clear that the "tariff tantrum" is the focal point of the market.
  • Last week's move down appears to have triggered a "retest"
  • However, the indicators tell us that the bulls should be given the benefit of the doubt here.

The "Tariff Tantrum," as it is being called, is clearly the current focal point of the market. With the glaring exception of the White House, most everyone agrees that embarking on a trade war doesn't do anybody much good. And whether or not the president actually makes good on the threat to impose tariffs of 25% on steel and 10% on aluminium remains to be seen.

However, the bottom line here is markets hate uncertainty and the proposed tariffs bring all kinds of uncertainty into the mix. Profits. Retaliation. And unintended circumstances to the economy are the primary issues traders appear to be fretting over presently.

Just like that, the two-week rally off the correction low ended and the "retest" began. Anyone who has been around awhile knows that emotional declines tend to follow a similar pattern. Something I call the "crash playbook." First, there is the dive that comes out of nowhere. Then the emotional or panic low. Then the "dead cat bounce." Then the "retest." And finally, the "bottoming/basing phase" takes hold. And the entire process tends to take a few months.

So, with the S&P 500 putting in three pretty strong down days and breaking back below its 50-day moving average last week, it appears that the "retest" is underway. The question now, of course, is how low will it go?

Remember, a retest can take many forms. The market can simply head down for a few days before buyers decide values are good and it's time to get back in the game. Or the retest can become much more literal and stocks run back down to the prior lows - sometimes even exceeding those panic lows. Such a move tends to be scary and wash out the remaining "weak hands." This creates a moment where everybody who wants/needs to sell, does so. And in short, this is

This article was written by

David Moenning profile picture
David Moenning is founder and Chief Investment Officer at Heritage Capital Research, a Registered Investment Advisor. Heritage is an independent, privately owned, investment management firm located in the Denver area. Mr. Moenning has more than 33 years of portfolio management experience and focuses on a risk-managed approach to capital markets via modernized portfolio development and dynamic adaptation to ever-changing macro environments. Most recently Chief Investment Officer for a $1.3 billion RIA firm.

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