After a nice morning bounce from yesterday’s Fed sell-off, the market got slapped in the face with some real fundamental news with President Trump’s tweet threatening to raise tariffs.   Not a done deal yet but can’t see President Xi scrambling to make concessions to make Trump look like a winner as Mexico did, or as Trump said Mexico did.

In fact, the Chinese may look to the Mexico example as another instance of Trump not following through on his threats, which makes negotiations even more unstable. In other words, America is likely viewed by China as a Paper Tiger.  Does Trump now have to prove them wrong?  HTF did we ever get here?   Pass the Kafka, please.

An escalation of the trade war with additional tariffs will do real damage to the global economy.   Nobody wins a trade war.

Hey, but Trump is standing up to China, right?  How idiotic.

Can you imagine if Trump was president during the 1962 Cuban Missile Crisis?  None of us would be here to imagine.

Key Levels

The S&P closed at 2953.56, just through the bottom of the “breakout zone” of 2954-2964, which brings the 50-day moving average in play at 2926.06.  A break of today’s low at 2945.23 cinches a beeline move to the 50-day, where algos will likely set their bear trap and try and bounce the market.  We expect a feeble bounce at best, which should be spanked.

The S&P must then hold the 2867-2889 level, which is huge support coinciding with the first Fibo and 200-day moving average, respectively.   We think that is where the index is heading over the next week probably after some strum und drang after tomorrow’s employment report.

To the upside, the S&P must first takeout 2964, the top of the “break-out zone” and then eyes on the 20-day at 2996.78.  Not achievable, in our opinion,  unless Trump tweets “April Fools” tonight.

Looks like a lot August holidays are going to be ruined with this new round of escalation in the trade war.

Big sellers.