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US Increases Trade Tariffs Against China


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Today, the US increased tariffs on $200B of Chinese goods as the US/China trade deal breaks down. China has vowed to retaliate for the move. The past week has seen the global markets shocked by two items: Iran sanctions and US/China trade breakdown. The markets had been expecting a US/China trade deal to be reached and optimism was quite high hence the rally in the Chinese stock market and the rally in the US stock market. What next?

Well, we believe this news, as well as future news that will likely hit the markets over the next 3+ months, will continue to prompt the Shake-Out we have been warning about. Depending on how severe these news events are, the rotation in the markets could be quite severe as well.

Our recent analysis suggests that recent lows in the US stock market may be near-term support and that the US stock market may attempt to form a bottom near these lows. Our research shows the Transportation Index is leading this move. We believe the ORANGE Moving Average level, as well as the RED and GREY Fibonacci projection points, will act as a temporary price floor this week and next. The YM could move lower by 100 to 200 points today, retesting these low levels, before recovering near the end of the day.

Gold is showing signs of a potential upside price leg in the early stages, just as we had been suggesting. Our April 21~24 momentum base call from months ago appears to be incredibly accurate. At this point, we are just waiting for the upside price swing to begin. When it starts, the momentum behind this upside move will increase as it will catch the attention of many gold traders and solidify the fear aspect of this move.

Silver is still lagging behind Gold as usual. We continue to believe the real opportunity for a great trade lies in Silver. The potential for a $22 o ~$28 upside price swing on a market breakdown or fear play is still very solid. Headed into the 2020 US election cycle and with all the uncertainty in the global markets, we believe this is the sleeper trade of the next 16+ months. When Gold begins to breakout to the upside, Silver should follow about 20 days later.

These new US trade tariffs puts pressure on China to come to the table and develop and honest deal. This is not the old way of slow negotiations with no real consequences. For China, the lack of access to the US market could be devastating in both the short and long run. Skilled traders should not be overly optimistic throughout this weekend. Protect your longs and prepare for more news over the next few weeks. This is the type of market that will make or break many traders.

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Happy May Everyone!

Chris Vermeulen



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About the author


Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

 

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change their trading results for the better and shares is stock and ETF trades through his Wealth Building Newsletter.


He is a regular speaker on HoweStreet, FinancialSurvivorNetwork, and the ProvenAndProbable shows. Chris also contributes market insight to several financial hubs like Barchart.com

 

Contributing author since 05/08/2018 

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