Trump blinked again, this time with China. The postponement of huge tariffs has sent futures soaring – right up to the 200-day moving average. Tariffs on Chinese imports will still be 30%, more than enough to eliminate the profit margin for many US retailers.
continued for members…
Is this overdone? Sure. Is it blatant manipulation? Sure. It’s right out of the Trump playbook to leapfrog what would normally be serious resistance.
Ordinarily we’d see a reaction at the SMA200, but SPX will gap above its and will likely pull out all the stops to remain above it.
From a fundamental standpoint, this “deal” tilts the scales in favor of inflation versus recession.
VIX and VX are both running into their SMA200 support, but don’t be surprised if more “breakthroughs” are announced to ensure that volatility is hammered even more. 
The USD is also soaring relative to the euro and the yen.
CL and RB are popping on the news, but are also running into overhead resistance. RB is backtesting the triangle top and CL is backtesting the Mar 2022 lows.
Needless to say, TNX is also popping.
But not as much as the 2Y…
…meaning that the 2s10s is breaking down. Remember that breakdowns often cause corrections. A mild pullback to the SMA200 would likely bounce at 2s10s’ purple channel bottom around 40 bps.
GLTA
Comments
2 responses to “Trump Blinks Again”
Hello PW, I am glad that the trade issue is getting “resolved” (for the time being?).
A long time ago, you explained that US have a huge debt load and US can’t afford high interest rate. Now the interest rate is getting higher. Wouldn’t they want to tank the stock market temporarily to drive people to bid on bond (higher bond price means lower yield in interest)?
Or they just let the stock market goes higher while the interest goes up as well? But then can US afford even higher interest rate on the debt? The threat of tariffs already causes inflation.
The administration would obviously love to drive interest rates lower without tanking the stock market – e.g. FOMC rate cuts. Unfortunately, Trump’s tariffs make it impossible for the Fed to lower rates. Hence, the substantial tension in the markets. In the end, a recession could be the deciding factor.