- Maybe Trump will impose those nasty tariffs on steel and aluminum.
- Maybe he won't.
- And as far as stocks are concerned, that is the point.
Maybe he will, maybe he won't. Impose those nasty tariffs on steel and aluminum, that is. And that's the point as the stock market appears to be figuring out that with this president, a deal isn't a deal until the deal is actually done.
That's right. Just about the time traders were starting to calculate who the global winners and losers would be with the President's wildly unpopular stance on trade, we learn that, hey, he was only negotiating. Such is life with this administration.
On Friday, stocks rallied as it started to become clear that NOBODY liked the Trump Tariffs. As such, the thinking went, maybe the President was merely sending up a trial balloon and would relent before the actual tariffs were put in place. One could hope, right?
Then on Monday, a similar theme played out. Stocks opened lower on fears of what a trade war with not only China, but also the EU, Canada and Mexico might look like. Before you could blink, the Dow was down 150 points and it looked like the bears had found a new raison d'etre.
However, then the tweets began to surface Monday Morning...
We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must..- Donald J. Trump (@realDonaldTrump) March 5, 2018
...treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying.- Donald J. Trump (@realDonaldTrump) March 5, 2018
While the President has remained steadfast in his stance to impose tariffs and/or fight trade wars because "they are easy to win," these tweets as well as other commentary/reports suggested that Trump may simply be negotiating here.
Another way to put it is the President may be showing signs of "flexibility" on the issue. But in any event, the mood started to shift on Wall Street around mid-morning Monday.
House Speaker Paul Ryan also weighed in. Ryan said he was "extremely worried" about Trump's trade plan and suggested that Congressional leaders may not rule out potential action if Trump decides to move forward with his plans to impose tariffs.
So, with traders doing a double-take on the probability of these tariffs actually being implemented, stocks rallied again on Monday. And just like that, the S&P 500 has recovered more than half of the dive seen from Tuesday through Thursday.
The bottom line is that after a serious bout of volatility, this market appears to be trying to find its footing. And to be sure, if the President does decide to defy just about everybody on the planet and impose tariffs on steel and aluminum, the bears will become emboldened again.
However, as long as it appears that negotiations are ongoing and that there is a chance a trade war doesn't happen, then investors may continue to buy the dips.
Looking At The Charts
From a technical perspective, the near-term lines in the sand are now clear and the game is fairly obvious...
S&P 500- Daily
In short, a break of either line would likely lead to a retest of the highs/lows, depending on which line is violated, of course. If the lower line, which represents Friday's low is violated, you can rest assured that a retest of the panic low seen on Friday, Feb 9 would come into play. And a break above the Feb 27 high would likely usher in a retest of the highs.
Thought For The Day:
He is nearest to God who needs the fewest things. -Socrates
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