D&D Note (3.23.2018) ~ China Strikes Back and $1.3 Trillion US Spending Bill Signed ~
China strikes back and responds with $3Billion in Tariffs against US agriculture industry targeting pork, wine and fruit. This is just the beginning of this trade war. In response to the steel and aluminum tariffs these new duties are up to 25 percent tariffs on the US goods. We still yet have to see the reaction to the newest IP tariffs Trump has just proposed. And while that number is $60Billion that is actually the trade number and the actual tariffs would be around $3-4Billion.
Since the market doesn’t have details on all the Trade tariffs its created a vacuum of buyers on moderate volume but imbalanced to sell of around 2.5Billion on market close which are retail investors (everyday people) selling out of mutual funds. That is whats caused the free fall in these last two sessions.
After threatening to veto the POTUS did in fact sign the spending bill today of $1.3Trillon sighting the strong dollars going to the military as his reason for changing his mind to sign the bill. He also gave Congress a warning saying he would never sign a bill like this again.
Once the spending bill got signed markets rallied but then broke down in the last hour of trading and crashed to close on the lows. The S&P 500 came within 4 points of the 200 day moving average of 2584 closing at 2588.26. That level will be tested in the futures and into Monday’s trading session. This would be a technical retesting of the 200 day from which we tested and bounced off of in February. So this is a good technical signal if we can bounce off.
UBS Floor Director Art Cashin’s saying “markets don’t bottom on Friday’s” kept D&D from stepping in to try and catch a falling knife. Instead we will await to hear more news from Washington on clarification and details to tariffs. Then come Monday watch the technicals and complete our buying process started Thursday. Perhaps we can get a solid turnaround Tuesday from the algorithms.
Canadian Pot stocks have been volatile all week leading into the congressional vote. After Bill C-45 the “Cannabis Act” passed in Canada’s House of Commons Thursday we saw strong rallies today.
D&D went overweight in IMLFF and got rewarded with a 25.32% gain today helping to keep the portfolio flat on the day with a tough tape.
The portfolio took it on the chin with our Micron buy on what was a good earnings report just not “greater than expectations”. The P/E ratio is still unbelievably cheap on MU and DRAM has at least another quarter of commercial expansion so we will hold and add to readjust our cost basis next week.
Financials sold off again today as the 10YR hovers back towards 2.80% and the 2YR yield declines. BAC saw a big decline of -4.52% and will be on D&D’s shopping list next week.
Copper breaks $3 amiss the evolving trade war. Oil is poised to possibly break out from $66 WTI. Gold found a good bid rising 1.50%.
– IMLFF up 25.32%
– EMHTF up 7.71%
– TWMJF up 5.71%
– TCEHY up 1.35%
– MU down -7.99%
– BAC down -4.52%
– NVDA down -3.67%
– ITW down -3.59%
– DOW down -1.77% (-424.69 points)
– NASDAQ down -2.43%
– S&P down -2.10%
– no sector finished higher of the session
– Financials down -2.99%
– Technology down -2.73%
– Health down -2.07%
– US 2-YR 2.258% (down -0.029)
– US 10-YR 2.814% (down -0.018)
– US 30-YR 3.062% (down -0.005)
– VIX 24.87 (up 5.56%)
Crypto (1:00 PST)
– BTC $8,632.18
– ETH $526.71
– BCH $1,000.01
– LTC $163.42
– Gold $1,347.30 up 1.50%
– Silver $16.56 up 1.06%
– Copper $2.9765 down -1.44%
– Oil $64.24 down -1.43%
– Brent $68.88 down -0.85%
– Nat Gas $2.612 down -0.99%