Big reversal in U.S. stocks today.
The S&P broke key support trading through the 50 and 100-day moving average and the .50 Fibonacci retracement level to close slightly below 2700. Next stop is the 200-day moving average at 2689.19 and the swing low at 2689.19. If these levels don’t hold, look out below, and they are only a chip shot away.
As we noted yesterday,
Flash: Peter Navarro is out on CNBC as we write trying to calm the markets. Don’t you think our trading partners see this, that the administration fears a market downturn, and can play hardball until the U.S. caves? Let the game(s) theory begin! – GMM
As futures weakened overnight, like clockwork, Secretary Mnuchin emerges from exile softening the administration’s tough stance on trade. That will be taken as a signal of weakness by our trading partners, in our opinion, who can now toughen up their negotiating position as they perceive the U.S. can’t even take the pain of a 5 percent stock market correction.
Asset Driven Economy
In an asset driven economy, a falling stock market has an outsize impact on the economy and puts the Trump Made America Great meme at risk.
In fact, today’s U.S. concession makes the administration look weak and the negotiations more intractable. President Trump will likely swing back to a harder line as he realizes this.
President Xi, Justin, Enrique, Angela, and eMac can sit back and let every tick down in the S&P extract concessions from the Trump administration.
As we have stated in earlier posts,
..we don’t believe President Trump is a free trader at heart but more of a protectionist and neo-mercantilist. There is no “Art of the Deal” – see his waffling on immigration – and no method to the administration ’s madness to negotiating anything, for that matter, but only driven by impulse and myopia. We hope the markets awaken to this reality before it’s too late. – GMM, June 24
The markets are finally getting it.