It’s been a year since Trump tweeted those fateful words: “…trade wars are good, and easy to win.”The S&P 500 closed at 2691 that day.  While stocks have rallied marginally (0.3%) since then, not everything has gone according to plan.  In fact, just this morning we learned that our trade deficit has reached levels not seen since 2008.  It has grown by $119 billion since self-proclaimed Tariff Man took office.

Bloomberg reports that the Trump administration is pinning its hopes for the market on an announcement of an agreement with China — leading some to fear that whatever deal is struck will be one of political convenience rather than one that leads to real progress.

Trump’s economic team has told him an agreement will unleash a market rally, the people said. Advocates of a compromise with China have also told Trump it is crucial to cut a deal soon to reap the full boost ahead of the election because benefits such as more Chinese purchases of U.S. soybeans and other products will have a delayed impact and take time to reverberate through the economy, they said.

Stocks seem content to wait around, with the 10-DMA serving as a touchstone for the daily gyrations.  But, at some point, even algos can grow impatient.

Today could be that day, as COMP’s 20-DMA is due to reach its 200-DMA — clearing the way for long-overdue backtests for multiple indices.The bigger question, of course, is whether those backtests will hold.

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Bears have seen slim pickings since SPX failed to take its .786.  The downside targets remain the same, with a 1.4% decline to the SMA200 the most obvious outcome.  If the bulls want to get cute, they might try for the 2.24 or even yellow midline at 2640 and construct a huge IH&S.

But, there’s a fair amount of risk involved in taking SPX below its SMA200.  Thus, while I’m bearish short-term, I’m cautiously bearish.  And, as we’ve discussed many times, there’s a great case to be made for SPX 2138 if the central planners should lose control.

Meanwhile, RB is running out of upside… …CL already has…

…as has USDJPY……and, as mentioned above, COMP’s SMA20 should reach its SMA200 today — the most likely scenario for a backtest and quite possibly the reason stocks have been stuck going sideways since Feb 25.

There’s a lot of pent-up tension in markets right now.  We see coiling in stocks, currencies, and bonds.  Witness the gyrations in EURUSD and DXY.  EURUSD has pushed off its SMA200 backtest for months……as drops in the pair and DXY have been bearish for stocks. If DXY can’t maintain its backtest bounce, it might very well drop to the channel bottom at the white target which could be (ta-da!) a higher low thanks simply to the passage of time.

On the other hand, GC has reached the 1286 target we laid out on Feb 21.  It has clearly overshot its channel backtest, so more downside is warranted.  However, DXY’s uncertainty is weighing on it.  I’d take profits here and try a long position with tight stops.  A bounce up to the purple channel top at 1346 (yes, again) wouldn’t surprise me.

On the bond side, ZN’s breakout and subsequent breakdown have both proven to be head fakes.  I hold to the 123’100 and 123’285 targets as originally set out months ago. TNX seems highly likely to make its move over the next couple of weeks.Note that the 2s10s breakout briefly took it back above its yellow TL. But, the TL is breaking down all over again.

UPDATE:  3:09 PM

So far, so good.  COMP and SPX are roughly the same distance from their SMA200s.  Not clear whether will be at the close or early tomorrow, or exactly where VIX will land when/if it happens.  But, I’d be prepared for a bounce at SPX 2750.37.  If it doesn’t — as suggested by the bond charts — watch for all hell to break loose.