A fresh wave of risk aversion swept across financial markets after the United States threatened to impose tariffs on an extra $200 billion worth of Chinese goods. This unfavorable move comes just days after the two countries slapped tit-for-tat tariffs on $34 billion worth of each other’s imports.
Less than an hour after the S&P 500 settled at the highest level since February 1st, global equity markets found themselves on the defensive after the White House provided a list and announced it would plan to move forward with a 10% tariff on an additional $200 billion of Chinese goods. This is where things escalate to a trade war and once again, we emphasize at these levels, the market has not priced in a full-blown trade war.
U.S. benchmarks are extending gains for a fourth consecutive day and the S&P traded to the highest level since March 13th. The overnight high of 2797.75 took out the June 13 high of 2796. What trade war? Of course, at these levels markets are not pricing in the risk of an escalating trade war.
The coming week (July 13) should yield an array of trending bullish breakouts, upticks, and up-to-sideways plays (except bearish-sideways crude oil). How are we going to know which bull trades to take/place that are clear signals or high-probability wins? I don’t know. I can lay out the information I have for informed/educated reader decisions that include the countertrade perspectives.
U.S. tariffs on $34 billon of Chinese goods went into effect at midnight ET and the S&P 500 spiked higher 10 minutes later. The market was technically positioned to do such, and it has pared those gains since. As expected, China quickly retaliated with symmetrical tariffs of their own.
As expected, gold made nice three waves of correction back to projected 1250 support level, but there can be room for deeper and more complex correction down to around 61,8% Fib. retracement and 1245 level.
After a losing ground into the close on Tuesday, major U.S benchmarks are all higher coming out of the July 4 Independence Day holiday. Investors and traders alike await a deluge of data and news over these next two days including Friday’s tariff deadline and jobs report. This morning brings an early look at jobs data with ADP Payrolls at 7:15 am Central.