Trade Wars are Easy to Win (We Hope)

Last week Trump threatened to triple down on China with even more tariffs if they didn’t come to the table for a trade discussion.

Meanwhile, the politics of the day have the country so split along partisan lines, there may be very little political advantage to Trump to deviate from this position.  So the game of economic chicken continues, and we may get to test the theory about how whether or not trade wars are easy to win.

Naturally, this has the market spooked a little bit.  But so far this isn’t enough to trigger a pull-back.  It’s just enough to arrest the climb higher.  So basically, it looks like a set-up to repeat similar price movements from last week.  The SPX 2872 level is still the key support area.  A failure here drops support down to the 2850 level.  As far as resistance goes, the first area will be around 2900 (or a few points higher).

So basically, September is shaping up as a consolidation month so far.  No one seems ready to call this thing over because the underlying economic data — and relative pricing of stocks (not to themselves, but compared with assets like bonds) still seem okay.  But the prospects (or at least media rhetoric) about trade wars and economic boogie men keeps things from moving substantially higher too.

For the week, the SPX appears neither over-bought nor over-sold.  So we’ll need to keep an eye on things to see if how the market resolves.  The big-picture trend remains positive, but there are no guarantees of anything heading into an election cycle.

<sorry, charts are down this morning.  Will try to get this updated soon>

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