This Morning’s Log Entry

The no-tariff news on Mexican goods has the market continuing last week’s rally this morning.

I have to admit that I’m a bit surprised that we’re looking at these levels at this juncture. The underpinnings of the latest rally are anything but fundamentally positive.

Last week’s surge was catalyzed by dovish Fed commentary that was justified based on Trump’s commentary (and he’s going all in this morning) that tariffs are wonderful, economically-stimulative phenomena. I.e., as long as he stays there the economy’s in jeopardy, and as long as the economy’s in jeopardy, the Fed will be poised to cut rates.

Technically-speaking, while the break above resistance looks impressive in terms of price, even the intraday RSI and MACD are flashing bearish divergences (at least as I type).

Bottom line for the moment: Bears (shorts) have found themselves trapped and are being forced to cover. A thrust through 2900 on the S&P could exacerbate more of the same. Ironically, as this plays out, it sucks in late-coming bulls and sets up the same phenomenon in the reverse. I.e., after the short-term bears are shaken out, and the market is owned by late-coming bulls, a dip below support would trigger stop losses and bring the sellers back in, in a big way.

Like I said this weekend, all we can count on for now is huge volatility – in both directions!!


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