Last week was an interesting one for stocks to say the least, as we really went from an environment where the US-China deal was being priced as a done deal, to one where there looks like there might be no deal at all now.
How quickly things can turn, as it was only last weekend that things started to fall a part.
What was one of the more interesting things on Friday was that stocks actually rallied strongly into the close. Which was a bit of a surprise. So what exactly was going on there?
One theory is that the tariff hikes were already priced in. These hikes have been on the agenda for some time, so perhaps there is an argument that we have already accounted for them previously.
At the same time, we didn’t hear anything back from China and still haven’t. They have traditionally been one to come out and slap on some tariffs of their own, even though the amount the US exports to China is far less. That said, I would still expect them to given that we have seen that in the past.
And of course, there is actually some hope that this might just be more negotiating tactics from US President Trump, who is known for his ability to make a deal. If that is the case then this move might see more heat on the Chinese economy and it would be even more reason to get something over the line.
The tough thing about all these negotiations, is that we simply do not know the truth of the matter and what exactly is going on.
The SPX did close strong and there is a pretty big support level below at 2800 that we will be watching closely, should the sellers keep coming hard on Monday.
This morning in Asia stocks are down nearly 1% and indices are pretty weak based on futures pricing. Which means that the good times might be over for now.
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