SP500 charts and the “art of deal”
Monday started with huge sell-off as Trump’s tweet sent stock markets into deep fall. Other risk assets were also hammered in the face of Trump’s threat to increase tariffs against China over the weekend. This move and rhetoric throws away chances of potential trade deal between the US and China and indicates that both sides have really stuck and can not reach a compromise.
For Trump it is a usual “art of deal” trick to raise stakes in a vital moment – and we have seen him successfully use it in the past. It is a big question if China will return to negotiations being threatened this way – in China losing a face is a biggest crime for politician.
Apparently, Chinese Prime-Minister’s visit to US this week will be called off and so are this week’s talks.
But it is worth to remember that agreements are vitally important both for Trump and Chinese Government. Both sides demonstrated how much they care about economic recovery and their actions speak much louder thatn tweets. Therefore, I believe there will be agreements reached – and rather sooner than later. There is too much is at risk for Trump – especially stock market’s reaction and we’ve seen how he reacted in the past when markets plunge. He did knew his tweet will cause this sell-off and apparently he is prepared. There could be many possible combinations from now on but ultimately – Trump’s administration will do anything to recover markets – the single important success indication of his presidency .
Anyway, this correction may continue but ultimately it is a chance to buy. Levels at 2885 and 2860 are good entry points and price still need to overcome 2915 and 2930 resistance levels in order to resume rally. Be cautious with risk and position size and prepare to bumpy ride.
Have a nice day and safe trades !