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Morning Commentary


By Charles Payne, CEO & Principal Analyst
5/7/2019 9:17 AM

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Line in the Sand

Yesterday was one of the wildest sessions in the stock market this year. It has seen gains in the first four months, the best in decades. A part of the 2019 rally was an assumption that a US-China trade deal was a done deal. Through a series of tweets on Sunday, President Trump reminded the stock market and China that it’s not a done deal.  Moreover, if talks don’t pick up, there would be additional tariffs of 25% on $250 billion worth of imported Chinese goods.

Do I have your attention now?

The news jarred the market, as the Dow Jones Industrial Average opened down by almost 500 points. Big losers included companies with great exposure to the Chinese market:

Boeing (BA) expects to make tens of billions of dollars from China's insatiable demand for commercial airplanes. However, that stock was also lower on revelations about its 737 Max airplane that were not only embarrassing, but some say potentially criminal.

After the first wave of selling, investors started to nibble, and then bought aggressively in those very names hammered at the opening bell. Yesterday, Technology (XLK) was the worst performer at noon, but it recovered nicely.

For the moment, Wall Street will remain on guard about higher tariffs and derailed trade talks, but investors loathe to miss what has been an amazing 2019 rally, and professional investors are also loathed to miss another chance to buy the rally they missed so badly.

We will know a lot more about the next move on trade this week when the Chinese delegation arrives and stops playing and wasting time. Meanwhile, there has also been a disconnect between Wall Street and media talking heads exploding over tariffs, and the actual number of companies that say it’s the most negative challenge for their businesses.

Early in this earnings season (6% reporting by April 12), weather and weakness in Europe were bigger issues mentioned during investor calls. (Source: FactSet)


The big spike in the CBOE Volatility Index (VIX) is something to watch, as this market rally has been impervious to everything but heighten volatility. I’d like to see recent resistance points hold.


Portfolio Approach

We made a lot of adjustments to our holding system, so make sure to check alerts or speak to your representative. If you don’t have a rep, contact research@wstreet.com.

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Today's Session

There is continued pressure this morning from trade tensions, as the story emerges of China at the last minute attempting to back out of their IP protection promises.  

China's top negotiator is coming, but the race against the clock suggests there could be increased tariffs for some period of time.  

We are going to stand on the sidelines with elevated cash positions, spying the best stocks for the bounce. This is not only the great time to get in names you missed, but for the market to establish key technical levels. If you are not a current subscriber to the Hotline, now is a great time.  Click here to get started today.


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