Trade War Fears

That is all the algo headline reading AI bots care about.  Forget about the credibility of the person doing the threatening.  It is one thing to be on the side of the big corporations doing big tax cuts.  It is a whole another thing fighting those big corporations with big tariffs.  One is doing what corporate lobbyists wants, and is easy to pass.  The other is fighting the corporate lobbyists and the bought and paid for Congress, which is a lot harder to do without committing political suicide. 

Perhaps its just the magnitude of the man's position, but there are too many people who take Trump literally at his word, which is like believing everything a pathological liar has to say.  I call your $50 billion, and raise you $100 billion!  Why not $200 billion? Or $500 billion? 

Let's not forget that raising tariffs is just applying a Chinese import tax, and with China reciprocating, having to sell goods at inflated prices in China with their tariffs.  It is essentially a tax on consumption of imported Chinese goods, which is a huge chunk of goods bought in the US.  And a lot of those Chinese goods are not manufactured and wouldn't be manufactured in the US because of expensive labor costs.  These proposed tariffs, if applied, (doubtful in its current form) would be cutting off your nose to spite your face. 

The pajama traders panicked on the news in overnight trading, taking the SPX down over 40 points, but a lot of that panic move on the $100 billion tariff headline has been taken back. 

This is similar to the overnight Cohn panic a few weeks back, when Gary Cohn resigning led to the SPX to drop 30 points overnight.  It made back all of those overnight losses during regular trading hours. 

It is always more bearish for the market to fall in overnight trading hours on no news than on scary news. The big gap down on Monday, March 19, was a gap and go move, and it was on no news.  That kind of move is always more vicious than a move that impulsively happens due to a scary headline.

This gap down is not as a high probability buy set up compared to the one on Wednesday, just because the SPX is 60 points higher than on Wednesday morning.  But still short term bullish on the market, but bearish in the medium to long term (more than 4 weeks out). 

As far as nonfarm payrolls, the worse the number, the better it will be for the market.  The last thing this market needs is interest rates going higher as investors are panicking about trade wars.