Quick note on current conditions…

As I type, Dow futures are pointing to a 220-point hit at the open. Headlines credit weak data out of China overnight, followed by weakening sentiment readings out of Europe.

Of course this weakening of conditions comes as no surprise to you (regular blog-reader), as that, as we’ve been preaching since the very beginning of this year (before, actually), is an unavoidable condition/consequence of the uncertainty fostered by any threat of a protracted trade war between the world’s two largest economy.

Trust me, there can be no winner in a trade war. By the way, “trade war” is a most oxymoronic term. Trade, by definition, occurs between a willing buyer and a willing seller. Folks who trade with one another never war with one another. Thus, a better term for current conditions might be “trade halt” or “trade destruction”; I like the latter, because it reflects the ultimate economic consequences of the current path we’re on.

While the above may sound dire, in it are sewn the seeds of solution. Clearly, the naivete among those who have brought us to this point is being schooled away by the emerging data. We’re seeing China come to the table with resumed purchases of U.S. soybeans and, per this morning’s announcement, corn. As well as the now official suspension of the 25% retaliatory tariff placed on U.S.-made automobiles. We’re seeing President Trump voice a true willingness to deal. In the latter’s case for sure, a political career hangs in the balance. 

Bottom line for the moment: Political self interests on both sides of the issue virtually assure that over the weeks/months to come there’ll be a steady flow of conciliatory commentary that’ll likely inspire that big money I mentioned yesterday to begin its accumulation (of stocks) campaign in a bit more obvious manner than present price action suggests (as long as general conditions are still net expansionary). I.e., I’m seeing some below the surface momentum that suggests there’s a quiet campaign already afoot. I’ll follow up soon with updated charts.

P.s. There are pundits who disagree with the notion that the political pressure on President Trump will inspire a more conciliatory tone as he heads into next year’s Congressional regime shakeup. I.e., they think that he thinks the China-bashing speaks to the wants of his base. The problem with their thesis is that the market will show zero sympathy for such a posture, and, at the end of the day, even the President’s most ardent supporters have their own pocketbooks to consider. And of course the President knows that…


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