Lots of investors have overlooked the story about the stock market and President Trump’s policy on the trade dispute with China dispute, some are calling it a war, I am calling Super Business Dealings
Here we explore the issue with the help of this chart, you have to click for it as it is content protected. Please click here for an annotated chart of S&P 500 futures.
Most investors do not watch futures, but since the stock market does not trade on Sundays and at night, a chart of S&P 500 futures is the only option to understand this story.
Note the following when you pull it up
• The chart shows that stock market futures were humming along when the unexpected news of China imposing new tariffs on US goods came.
• The chart shows that the stock market fell on the news of new tariffs from China. The new tariffs were a clear escalation of a trade war.
• The chart shows that the stock market started moving up after the much-anticipated speech at Jackson Hole by Fed Chairman Jerome Powell.
• Chairman Powell did not come out and say that he was ready to comply with most of President Trump’s commands/demands. But, if you read the speech’s text carefully, there is an unmistakable conclusion that Mr. Powell has mostly given up to President Trump.
• President Trump nevertheless criticized Mr. Powell. Many headlines about Powell’s speech in the media lacked and real scrutiny of the speech.
• The smart money in the stock market clearly understood that Mr.Powell was Dovish and started buying equities.
• The chart shows President Trump’s angry response to China.
• The chart shows that after his angry response, the stock market marked a major decline.
• The chart shows that the next time stock futures opened, they gaped open down. Since many investors follow the DJIA, as a reference, at 1 point stock market futures were down equivalent of about 300 DJIA pts after having previously fallen over 600 pts.
• Stock market futures jumped when China Vice Premier Liu He called for a “calm attitude” and consultation, and President Trump said that China wanted to get back to the table again.
• The story shown to us on the chart comes from the VUD indicator. The VUD indicator is the most sensitive measure of net Demand/Supply in real time. Positive is shown on the chart with Green, and negative is shown on the chart with Orange.
• The VUD indicator shows that during all of the selling, the indicator was mostly positive, and this means that sellers were very aggressive while buyers were being extremely careful; but there was net buying throughout most of the tumultuous frame. This is a short-term positive for the market.
It is clear that at least short term, President Trump’s move of an extremely aggressive and quick response of raising tariffs on Chinese goods worked.
It is good news for investors in the short term based on the information available as of this writing.
Investors must to be aware that the situation can change rapidly. Therefore, it is important for investors to stay tuned to credible analysts with proven track records. Those looking for trading opportunities may want to stay tuned in real time. And tune out the noise.
Gold and silver futures had also run up when stock futures fell. As of this writing, gold ETF GLD, and silver ETF SLV are pulling back slightly, compared with the highs seen in futures.
These developments are positive in the short term unless there is new negative news.
I see a better outcome for the US in all of the trade negotiations, we have the leverage. But always remember this law, “Nobody knows with certainty what is going to happen next in the markets.”
It is your money, your responsibility, so pay attention.
Making and Keeping America Great!