A question for investors today is how they want to react to President Trump threatening to put more tariffs on Chinese goods.
Let’s explore the issue with the help of a chart.
Please click here for an annotated chart of ETF S&P 500 ETF SPY, which represents the S&P 500 Index SPX. Please note the following:
• The Chinese are notorious for dragging out negotiations to get the best deal. Irrespective of your political leanings, Trump’s latest move seems to be in the long-term best interest of the U.S. and the stock market.
• The short term for the stock market is a different story.
• The chart shows five support zones. These support zones are based on a number of factors that have proven to be accurate in the past including how algorithms tend to trade as well as money flows.
• The chart shows the target zone for a potentially explosive rally on a short squeeze. If it turns out that there is a good trade deal soon, those who are short-selling now will be forced to cover at much higher prices.
• Expect stocks that are dependent on China to be affected more. These include Apple AAPL, Starbucks SBUX, Nike NKE, and Yum China YUMC. Expect less impact on Google GOOG, GOOGL, Amazon AMZN and Facebook FB, Microsoft MSFT and semiconductor stocks such as Intel INTC, AMD AMD and Micron Technology MU may be adversely affected.
• Expect Chinese stocks such as Alibaba BABA and JD.com JD to be adversely affected.
• Expect day traders to make money by trading leveraged Chinese ETFs YINN and YANG.
The best thing investors can do is to guard against whipsaws. Expect many whipsaws based on rumors, tweets and new reports….Read more at MarketWatch.
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