It’s Still “The Art of the Deal” By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - We can’t forget “The Art of the Deal”…
- The primary trend has broken…
- What Big Money has been up to in all this…
- And our swing trader’s take on current conditions…
- Your questions answered in tomorrow’s podcast…
Have you forgotten who Donald Trump is? Whenever someone expresses how shocked they are at the president’s approach to trade, taxes, immigration policy, war negotiations, and even floating ideas of annexing Greenland or Canada… I can only conclude they’re suffering from goldfish-brain… or just haven’t done any serious thinking about who this guy is. Granted, I have never read The Art of the Deal. But I am well aware of its foundational principle with respect to negotiation. Trump has a certain negotiating style that, when used effectively, yields big results. He asks for the world up front, fully aware of how audacious that starting position is and what the reaction will be. Then, he compromises. This achieves two things: - “Shock and awe.” It unloads a massive salvo of pressure on the opposite party, catching them off guard and making them more prone to slip up and bend.
- It raises the floor of the potential outcome. What most negotiators would consider an impossible reach, Trump instead sees as the likely outcome after he compromises on his extremely impossible starting position.
This is exactly what’s happening with the tariff policy. The new tariffs are not just “reciprocal,” they’re retaliatory, going beyond tit for tat and devastating countries with the largest trade surpluses against the United States. Trump’s betting that the American consumer and economy (they’re almost one and the same) can withstand this new policy framework far better than any other major trading country in the world. Time, and the negotiating table, will only tell if he’s right. But we can’t forget The Art of the Deal. Knowing what we know, the likelihood is far higher that the initial tariff rates will go down, not up. And that could provide some short-term relief. | Recommended Link | | | | One man is saying: FORGET most stocks and don’t panic about the market volatility. Because his strategy ignores 99% of stocks out there… And concentrates on profiting from gold — no matter what the market is doing. It all comes down to focusing on just one stock to profit from ANY movement in gold. Click here to watch right now. |  | | But right now, markets are having a hard time digesting the news… The Nasdaq 100 entered an “official” bear market in Friday’s trading, down more than 20% from the Feb. 19 high. That joins the Russell 2000 small-cap benchmark and the S&P 400 mid-caps, both of which are also in the Red Zone based on TradeSmith’s systems. The S&P 500 and Dow Jones Industrial Average are not far from entering their own bear markets. As for our TradeSmith indicators, both the S&P 500 and the Dow are poised to follow suit and close in the Red Zone as I write this on Friday. This is one of those extreme market slides that don’t happen often – or at least, they didn’t used to. You have to look at the 2020 pandemic crash, or before that Black Monday, for a similar degree of downside momentum. Those proved great buying opportunities – but only in hindsight. We can’t stick our neck out and call it like that right now. The fact is, TradeSmith’s indicators are fully risk-off. That means we should be too. If you haven’t already, read Keith’s Friday dispatch that’s all about this. The only thing different from there is that we base our Red Zone on the closing price, so the S&P 500 and Nasdaq 100 weren’t officially in the Red Zone yet. Suffice to say, the primary trend has broken in quick fashion. All the long-term uptrend lines have been violated. Now, we do have a few levels to look at, but none of them are fun. If the market is going to keep selling off from here – big “if”… The SPDR S&P 500 ETF (SPY) has major support at around $516, just north of where we are now… then down at $489, from last April’s low… or down to $450, the summer and winter 2023 high: 
As for a recovery… If there’s going to be a swift rebound, it’s going to run into the rising green line, which was previously support and is now formidable resistance. Safe to say, my cautious bullishness of the past several weeks has borne rotten fruit. But it’s time to remove the dozen overcooked eggs from my red face and get back to work. Right now, all of our analysts are sharing their latest thoughts with our paying subscribers. I’ve gone around and collected what I think are some of the most valuable, as well as some bits from our extended network that are worth taking a look at. Let’s start with Jason Bodner… Regular readers know Jason is our growth investing expert and a master of institutional order flow. His time at Cantor Fitzgerald in the 2000s showed him how Big Money moves markets, and he learned how to spot what that money’s broadly doing at any given moment… Writing to our TradeSmith Investment Report/Quantum Edge Pro readers, Jason had this to say about the week’s trading… We’re seeing a whirlwind of emotional selling, algorithmic selling, and forced selling at institutions after President Trump’s sweeping tariffs announcement yesterday rattled companies, investors, and global markets. Rarely do we see worst-case scenarios, but this comes pretty close. I also don’t think it’s the end. This is still very much a work in progress. There are many unanswered questions. Whether the tariffs will take full effect or not. Whether and which nations will negotiate to bring them down. Whether and to what extent other nations respond with tariffs of their own. We got details and some frankly puzzling numbers yesterday, but I believe this is more hardball negotiations than a final deal. I would be absolutely shocked if tariffs end up anywhere close to yesterday’s numbers. Even so, “blood is in the streets,” as Baron Rothschild said, as investors sell first and ask questions later. It’s fear-based selling rather than data analysis. Investors worry that inflation will increase and economic growth will slow. It’s possible, but it’s still speculation at this point. As you know, I’m all about the data. The most important data shows the major indexes dropping between 3% and 5%. Our Quantum Edge Pro stocks are down about 6.5%. And unfortunately, this comes on the heels of another tariff-induced slide that started six weeks ago. It’s painful, I know. I’ve been doing this a long time, but I still get that uncomfortable feeling in the pit of my stomach. When our stocks go down, our emotions intensify. That’s precisely why we don’t want to join the panic. The far right of the chart below underscores the risk-off nature of this move. We’re seeing the highest number of Big Money sell signals in the past three years, and the highest since the last bear market of 2022 was well underway: 
Jason’s cautioning both the buy and sell side of the equation right now. There’s simply too much uncertainty to make a big move in either direction until we start to see some stability. Plus, something like the following could happen… I also believe we will not have to wait long for a catalyst to bring buyers back in, perhaps in a massive way. If the headlines soon say, “Europe and U.S. Reach Trade Agreement,” you can bet stocks will jump. I think that is the real endgame here. Another potential catalyst is President Trump announcing tax cuts for individuals, corporations, or both. He cited U.S. history in his presentation yesterday to make the point that when other nations pay tariffs, Americans shouldn’t have to pay as much in taxes. And believe it or not, he doesn’t have a lot of time to make all this happen. President Trump does not want to be the man who torched the American economy and lost control of Congress in the midterm elections. If that happens, he has little hope of accomplishing much, if anything, in the last two years of this term. Jason clearly knows The Art of the Deal. Odds are good that we see some headline-driven relief to stocks, if we haven’t already. William McCanless in Trade Cycles has a different take… We saw a lot of record-setting activity last week, and William McCanless, expert of cycles and seasonality, took notice. Here’s what he wrote to his Trade Cycles subscribers… - The S&P 500 market cap has just experienced its second largest one-day drop in HISTORY (rivaled only by COVID)…
- In addition to that, cyclicals vs. defensives have experienced the worst one-day change in… ever…
- The daily sentiment of the S&P 500 is the second largest one-day drop in over 20 years…
- Hedge funds have been selling more than at any other point in a decade…
- The American Association of Individual Investors Sentiment Survey shows the third highest bear print in its history…
- And, to top it all off, we are at an extremely high put/call ratio, which often marks a clear bottom.
William’s assessment of this unique situation is simple. It’s such a rare oversold condition, we almost have to bet on a vast short-term recovery to follow, and in short order. It’s important to understand the distinction between analysis like this and something like TradeStops. TradeStops is for much longer-term investing. It’s for locking in big gains in winning positions and giving us broad market buy and sell signals. What William’s talking about here is something quite different: swing trading. We’re facing extreme conditions, and the pendulum has swung about as far in one direction as it could conceivably go. To William’s mind, it’s a buying opportunity. Finally, let’s check in with market whisperer and decades-long veteran Louis Navellier… Louis, as you’ll remember from my conversation with him a few weeks back, has a unique and helpful view on the tariff situation. He believes that all the mainstream media pearl-clutching about the tariffs is overblown, and so is this market reaction. Ultimately, Louis sees this as an opportunity to bank on an easier lending environment with four or more Federal Reserve rate cuts this year, translating into a great time to own stocks. Louis recently sat down with TradeSmith Editor-in-Chief Luis Hernandez for some timely remarks on the market reaction. I urge you to check it out below. 
Before we run, big favor to ask… A lot of you seemed to really enjoy the TradeSmith Roundtable I held with Andy Swan, Lucas Downey, and Jeff Clark. That’s great news, because we decided the TradeSmith Roundtable is here to stay. This week, I’ve booked time with Jason Bodner, Jeff Clark, and our CEO, Keith Kaplan, for more off-the-cuff conversations about what’s happening in markets and how you can best prepare. And we want you to be part of this conversation… So before we record tomorrow morning, send in your questions to feedback@TradeSmithDaily.com and I’ll pass along my favorites to the group. To your health and wealth, 
Michael Salvatore
Editor, TradeSmith Daily | 
No comments:
Post a Comment