Market Briefing For Friday, July 6
Trump's tough tariff tweets target tendencies to tilt trading trends. (OK, I had fun with that;) but seriously, the President raised the bar yet-again this evening, hours before tariffs kick in , and that has Futures lower and helps remove the global 'assumption' that it's all a 'bluff' and we won't actually do it. That's how you start trade wars, in a world that doesn't believe an Administration will actually do it.
That's also how the market held together and rallied (into a fabled 'Mom's Birthday' move) that really just reflects a seasonal tendency to firm after the 4th. And I have sometimes referred to it as the near-completion of any rebounds off of June lows; ahead of sometimes rockier late summers. For the obvious question about this year: the entire year has been rocky since plunging from my warning about the parabolic thrust in January.
Now we think it gets dicier despite some believing excess is worn off. That is partially so for some of the stocks that are softer; Financials; Telecom & Utilities forinstance. And there's little doubt that if interest rates were firm, not as soft as they are regardless of the Fed's policy (which hinted in Fed Minutes released today at a hawkish leaning forward), stocks would have more trouble holding up.
Now, just because Financials are low does not at all mean they can't drop more; in fact they likely will (I have warned about them all year too).
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We don't urge selling everything; just making sure one is prepared for serious correction activity as a 'process' as this Summer evolves; perhaps into the Fall. I'm far more comfortable in the beaten-down (but viable) or under-radar stocks as far as any newer holdings are concerned. And it's nearly time to warn those who are doing lots of option writing in Calls of encroaching volatility. Depending on strategies that can work or be painful quite rapidly.
Bottom line: 'trade' and tariffs of course are a catalyst; so is the absence of higher interest rates. That's the fundamental yin-yang of this market to a degree. You can break the market with low rates prevailing; even nearing an inverted yield curve; but you would do it more dramatically if rates were higher. Fed policy is at loggerheads with reality a bit; but I've assessed it in that manner all year; which is why I thought they'd hike rates regardless.
If we get a trade deal with the EU we'll rally; but not sustain it. If that by a miracle sees some unknown Chinese deal floated; that will also. But what if there's not? Then we slip-slide, rebound, and falter; and find ourselves in probably short-order below the 200 DMA, with traders very skittish; rightly knowing that one news clip that's favorable, and the market pops up even if temporarily.
That's the kind of market we're in; but likely going beyond the pattern that sustained the 'range of the S&P' for so long, that I called 'rinse & repeat'. In-absence of trade deals, expect to see this considerably lower within the next few weeks (if not days); and keep in mind there is no reason for us to fret excessively; since for the prior month I described those lateral highs in the S&P as the sell-signal because all the rallies failed to gain traction.
So moves lower will merely confirm what the market already told us. And in hourly terms, the Sept. S&P 2740 level still remains an inflection (up to 2760 but doubt it goes there); with the 2700 even level likely more key to watch going lower; more so than awaiting the 200 DMA near 2675. |
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Thursday (final) MarketCast
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