The “on again/off again/& back on again” possible tariff trade war took a step in the “on” direction again last night. Stock markets all over the world reacted harshly today, especially in China. The 3 major indexes in the US all suffered a fresh day of professional selling, aka a “Distribution Day”. As a result, our Current Market Outlook remains “Uptrend Under Pressure” and is under a “yellow” light.
One bright spot since Februarys sell off has been the significant outperformance of US small stock indexes, most notably the Russell 2000. As an example, even with todays big down movement in most stocks, the Russell 2000 managed to eke out a small gain. Many investors are coming to the realization that smaller companies based in the US who sell all or virtually all of their products to other US companies are not directly impacted in a negative way by tariff talk or a possible trade war. Big institutional investors have been scooping up shares of these type of companies for weeks.
The major US indexes are attempting to find price support at key technical levels at this moment. While the longer term trend is still up and the economy is healthy, the short term outlook is uncertain and at risk due to further interest rate hikes this year and a trade imbalance that stands in the way of making America great again.
Our proprietary 3 stage sell-signal process remains in a first stage “sell”. An additional day or two of harsh selling this week or next would likely push our system into a deeper 2nd stage sell signal. Please note, however, good technical market action from a successful & peaceful end to the possible trade war would likely erase the first stage sell signal and return our official outlook to a “green” light.
No matter what the outcome is of the current issues that are stressing investors, we are fully engaged and will respond in a proactive and disciplined manner for our clients. Have a Triumphant day! ®