Skip to main content

S&P 500 on edge of disaster as trade war media chatter worsens

Written By | Apr 7, 2018
S&P 500 action

Cartoon by Branco. Reproduced with permission and by arrangement. (See link below)*

WASHINGTON, April 7, 2018: Traders and investors alike were shell-shocked at Friday’s closing bell on Wall Street. The Dow plunged nearly 3 percent on the day, and the S&P 500 and NASDAQ got pounded almost as badly. Following up on our rather gloomy Friday stock market commentary, we have more complexity to add to our witches’ brew today.

The “tale of the tape”

First, let’s touch upon what traders used to call “the tale of the tape.” They were referring to the constantly updating electronic trading tape that graced most brokerage offices in the early 1980s when this writer worked as a retail stockbroker himself. Today, you just find a computer and punch stuff in.

At any rate, experienced tape readers memorized anything from 100 to 1000 stock symbols and could catch the market’s mood just by reading the trending direction as the tape whizzed by. Stock charts were a little hard to come by in those days for retail traders, but brokers, at least, could access primitive green-screen versions on the old Quotron machines we used to use.

Today, you can get constantly updating charts through your broker’s software interface on your home computer. Sometimes the tea leaves charts can give you great joy. At other times they can compel you to head for your liquor cabinet. Your goal: single-malt compensation for all the money you lost in a single day.




Friday was one of those days

Another Freaky Friday on Wall Street, as S&P 500 tanks. Again.

Looking at a three-month chart that logs in the jagged whipsawing path of the broad-based S&P 500 average, you can readily see that this is a day-trader’s market. No actual investors need apply.

S&P 500 average

S&P 500 average, 3-month chart as of COB Friday, April 6, 2018. Chart courtesy of StockCharts.com.

After markets hit their all-time highs in January, most stocks found themselves trapped in a Never-Never Land with few ways out. Markets suddenly turned from irrational exuberance to sheer terror. Trying to figure out whether any given day would be violently up or violently down was the investing equivalent of finding yourself in the center of a Middle East minefield.

The Fed and their relentless interest rate hikes do have some influence on the market’s sudden volatility. But the relentlessly over-hyped MSM trumpeting a “Trump trade war” really sets markets on edge. The tape – or today’s virtual equivalent – veered from wildly optimistic on good news days to near-suicidal when trial balloons were floated concerning new Chinese or American trade restrictions.

#Never Trumpers, #Resistance and China collude?

You get the distinct feeling that both the #NeverTrump #Resistance transfixed media and Communist China have been lobbing (mostly) fake news to make Trump look bad. Evidence points to the victory lap the president took during his State of the Union Address. You know, when he touted the stock market’s wildly optimistic performance on his watch.

That telling bit of credit-taking gave the media and the Chinese their cue to let the air out of the Trump Rally balloon. And boy, have they ever been pushing the market negativity hard ever since. CNBC is particularly egregious here. Most of their daily online headlines push specific or surreptitious negative headlines attributing every market disaster to the duly-elected President they’re all dying to impeach.

You can follow the results of each barrage of negative headline hits in the chart above. Each hit follows some kind of tariff threat or rumor of a new tariff threat. Each has been exacerbated by fusillades of negative,seemingly coordinated anti-administration news stories that pump investors to dump their stock positions.

“Warning! Danger, Will Robinson!”

Friday’s dismal trading action seemed just the latest result of the media’s whisper campaign against Trump. This constant MSM negativity never blames China. But the above chart illustrates the result. The following is a brief technical explication of this activity’s action on the market, penned by Stockcharts.com’s John Murphy.

Technical notes on the fall of the S&P 500

Notes Murphy,

“THIRD TARIFF THREAT SINKS MARKET… Just when it looked like the stock market was about to recover from the first two rounds of tariff threats, stocks were hit with a third and bigger $100 billion tariff threat after the close on Thursday. As a result, stock market indexes fell more than 2% on Friday with all market sectors in the red. That pushed all three major stock indexes back into the red for the week. Foreign stocks also fell sharply.



“After the first two tariff-induced selloffs, stocks rebounded on assurances that the tariff threats were a negotiating ploy; and that negotiations were going on behind the scenes between the U.S. and China. Friday’s negative reaction suggests that markets are no longer buying that story.

“The president talked about the possibility of short term “pain”, while his Treasury Secretary said on CNBC that a trade war was possible. Meanwhile, China denied that any negotiations were taking place.

In that dangerous and unpredictable environment, it seems fair to suggest that any form of rational market analysis — whether it’s economic, fundamental, or technical — takes a back seat to daily headlines. It’s hard to do business when someone has their thumb on the scale. And right now, there’s a very heavy thumb on the market scale. Friday’s selling wiped out three days of gains.”

(Note:Italics are by this columnist. If you’re interested in subscribing to Stockcharts.com, just hit the link. And no, we don’t get a cut. This is a public service announcement for investors in search of an excellent source for up-to-date charts and incisive technical (and notably non-political) analysis.

Next: The economic problem with Open borders and illegal immigrants: A major worry for U.S. stock markets

 

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17