Not a good open this morning after a strong day was sold off into the close yesterday…after a gross day Monday.

Leave no doubt, the internals are heading south. Leave no doubt, fewer and fewer working while more and more are breaking support.

Yields down to 2.366 as we write this. Something is up.

China tariffs and next up, the EU. Yippee!


Shorter-term, doesn’t take a genius to know markets are oversold. But oversold does not mean we do not get more oversold. The biggest problem markets will have right now is that most things have turned down for now. We suspect this will lead to some violent back and forth. Just leave no doubt, things are now tougher.
We would like to say it is good news that we hear this morning reported from the White House that a trade deal is not close and that trade war could last a long time! Yes…getting the bad news out can often be good news. But the market action has been horrid. We now take a step back. We respect that the market is now under pressure. We start watching for relative strength…those stocks that hold up best during market turmoil. We are patient. Do we believe this is the start of something much worse? We do not know but if worse cards come out of the deck….


-Do you believe us now? For months, we have been telling you that nothing good comes from tariffs. For months, we have been told by the backers that it was just a tactic. Those backers of tariffs would have ripped any Democrat to shreds who applied tariffs…that hurt farmers…and then subsidized those farmers. We have even watched in amazement how some “conservative” economists all of a sudden…love tariffs. Don’t you just love politics?! So…-
-Trust matters. We have been told that China pays for the tariffs. We know better. Even Kudlow knows better as he stated the truth over the weekend. How long until Kudlow is out of a job? We have been told for months that we are in a stronger position than China. We have been told for months that negotiations were coming along nicely. We were told for weeks that they were getting close. We were told for days that it was just a matter of dotting the I’s and crossing the T’s. We were told a dozen times on Friday that again, talks were “constructive.” We find out this weekend talks were not constructive.-
-China Global Times Editor Hu Xijin tweeting “China may stop purchasing US agricultural products and energy, reduce Boeing (BA) orders and restrict US service trade with China. Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically.”
-China confirms it will raise tariff rate on $60 bln tranche to a floating range of 5-25% from 5-10% prior; tariff rate will go into effect June 1st at 12:01 a.m.-
-Apple (AAPL) is down another $8.30 this morning as trade tensions escalate between the U.S. and China. Apple’s iPhones and Apple Watches are currently exempted from tariffs but could be subject to the new tariffs. –
-Boeing (BA) is down another $12 this morning on the news.-
-Chinese ADRs are again mauled.-
-Major indices, both here and around the globe are again smacked. Futures down almost 500 DOW points this morning.-
-Markets have to be worried that this started with “the tweets out of nowhere” giving all business a measly 5 days to prepare for new tariffs. Markets were prepared for the exact opposite.-
-Markets have to be worried that the President gets it plainly wrong on who pays the tariffs…and all one has to do is “google” WHO PAYS TARIFFS?-
-Markets have to be worried that this will only escalate.-
-Markets have to be worried that China has shown what we already knew and that is they will only act in their own best interest. Remember, China will not have elections in 2020.-
-Markets also have to be worried about Iran, North Korea, Russia, Nadler, Mueller, debt, deficits, the mediocre Mets, the mother of dragons and all that crap.-
-After a nice reversal off the all-important 50 day moving average Friday…it again gets tested this morning. The hope is another reversal at this vital support. This is not out of the question. But…we think the word “constructive” has now been played out and not sure what does the trick. Hopefully, the institutions stand up again and defend. Again, not out of the question but leave no doubt, every time down gets the internals deteriorating.-
-Other stuff:-
-UBER…You mean a company that loses 58 cents every time they provide a service does not open well after the other company (LYFT) gets bombed from their opening price?-
-“Constitutional Crisis!” Yup…the new favorite “go to” term of a certain party which of course gets parroted by the media. You mean $22 trillion of debt and $1 trillion yearly deficits is not a constitutional crisis?-
-A certain congresswoman now says it was sarcasm when she said that we have 12 years to save the planet. Thanks for the head’s up. We had no idea you were full of …. Speaking of full of…., so when Al Gore said 13 years ago that we had 10 years or else…what was that?-


Futures down a bit and all over the place as tweet after tweet comes out on China trade.

But backing away from the noise:

Major indices held the 50 day moving average yesterday…a place that normally holds in an uptrend. Get the hint!

The NASDAQ, NDX, RUSSELL, TRANSPORTS and S&P bounced off this vital area. The DOW is below but influenced by a couple of names in BA and MMM.

Watching these areas closely.

It was good news yesterday that a bunch of leading growth software names stood tall and either held or got moving again. Leading growth names acting well is always important. If they come and get them, it will be a negative sign.


Uh…the market is down on the open as trade tensions escalate. We are of the hope the president backs away from the tariffs that go in effect tomorrow. We really thought he would because he had no choice but not sure any more.

Markets were overdue to correct because of a strong first 4 months. Looks like they got the catalyst. Keep in mind, a backing away from tariffs would help so it remains quite the news-driven environment.


Crappy day yesterday though nice little rally at the close to make things less worse.

Futures down this morning. China trade front and center. WE DO NOT BELIEVE THE PRESIDENT ENACTS NEW TARIFFS THIS WEEK. If he does, major disruptions as no business has prepared for it. In fact, they have been told for weeks and months how well negotiations were going. If tariffs are enacted…well, let’s just hope we are correct in our assessment.

Corrections do happen. After all, major indices were up 2-3 years of average yearly gains in 4 months. We just got a catalyst for one. We have no clue how long it lasts or how far it goes. But remember, it is easiest to isolate strength during a period of weakness.

More to come.