The China trade wars from the first Trump administration were tiresome, since they went on for months, jolted the market every time there was an announcement of “trade talks are going well” (it became a meme at the time), and, in the end, resulted in a laughable deal in which, effectively, the United States paid a huge sum of money for the sake of the creation of a few tens of thousands of jobs to make the whole charade look like a success. Suffice it to say, the U.S. didn’t dominate China after those talks were done, nor will they do it this time.
Even so, the fresh memory of the giant rally about a month ago (green tint) based on nothing more than Bessent and China putting a pause on tariffs, compels people to continue to load up on stocks, since Bessent is in London at this very moment doing Round Two with his counterparts from the middle kingdom. I imagine before Tuesday’s session is over, there will be some other flavor of “trade talks are going well, and we’ll meet yet again”. This will go on until the end of 2028.
The small caps are certainly enjoying the ride. For the past week, the Russell futures have done little but go up, and they are caressing their Fibonacci level at this very moment.
Over the same timespan, tech stocks are higher as well, although they aren’t showing the consistency that small caps have.
Indeed, looking out upon the sea of green this morning, just about only one stock stands out, and that’s Tesla. Why? You already know: because Trump doesn’t like Elon anymore.
That one fact of personal animus has wiped out literally hundreds of billions of dollars of shareholder value in a matter of days. (The rumor mill also made clear this weekend that Musk’s black eye didn’t come from his toddler, as he professed, but instead from the aforementioned Bessent, which has got to be a little awkward, since the Treasury secretary resides in a large mansion literally called The Pink Palace).
In any case, the final meaningful hope for the bears is the /RTY fibs which, as illustrated here over a four-year period, have done a yeoman’s job respecting the line levels as support and resistance. If some feel-good announcement from Scott “slugger” Bessent wrecks the analog shown below, well, I guess we’re back to those 2018 feelings again.
I remain lighter than I’ve been in a very long while, as the risk of these China talks and the CPI coming out pre-open on Wednesday are simply too grave.
