Market Does Not Care About Higher Rates and Tariffs – Buy If This Happens

Posted 9:30 AM ET - The market is extremely resilient. Yesterday the FOMC statement was very hawkish and rates were increased a quarter of a point. Powell said that four rate hikes are likely next year and the Fed plans to aggressively normalize rates. The ECB said it is winding down quantitative easing this morning. Stocks shouldered the news and the S&P 500 is up in early trading. China's retail sales and industrial production were light. Analysts believe that Trump will announce $50 billion worth of Chinese tariffs in the next day or two. This is a little less than the $70 billion proposed a month ago and the list of 1300 products will be made available. Last week steel and aluminum tariffs were imposed on our G6 allies. The rhetoric was heated and members promised retaliatory action. Trade wars sparked selling earlier in the year and investors have grown numb to it. These taxes are no longer threats they are reality. If the "tit-for-tat" retaliations escalate we will have a trade war. The QQQ is finding some resistance at the all-time high. It has been strong relative to the SPY which is struggling to get through resistance at $280. I think that tariffs imposed on China could rattle investor confidence and I'm not going to buy until the market proves it can get through SPY $280. Buy the QQQ if the SPY trades above $280. I don't believe that will happen today. Day traders should be cautious early. I will be looking for signs of a reversal. If the early rally starts to deteriorate right after the open I will get short. I will use the high of the day as my stop. If the market is able to hold the early gains for the first hour, we will grind higher and the likelihood of a reversal will decrease. The first hour is critical. Use SPY $280 as you guide. I am a reluctant buyer at the high-end of the range. Negative news is mounting and I need to see a bona fide breakout before I joined the rally. If I do buy I will keep tight stops. . .

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