An intriguing pattern over the last few weeks has been major gaps being filled and then reversals in the opposite direction. Yesterday, the S&P 500 filled the huge gap created on Monday, triggering selling that saw the index close off the highs of the session.  This morning, its about holding intra-week support points.

• Dow key support 25,651
• S&P 500 support 2,851

S&P 500

China Rattling and Shaking

The market has shown great resolve after stumbling out of the gate on Monday, and the reason has been a focus on U.S. data not geopolitical tensions and the trade war with China.  That’s changing this morning with saber rattling from China where official are saying trade talks are off until United States stops “playing little games.”

The communicated and blog postings aren’t all bluster, as one editorial says China doesn’t intend to change or replace the United States, but it says “no power can stop the Chinese people from achieving their dream,” pointing to historic hardships going back to the Opium Wars.  The most provocative line:

“If anyone thinks the Chinese side is just bluffing, that will be the most significant misjudgment since the Korean War.”

Despite the tough talk, there are more signs China’s economy is vulnerable, which makes efforts to shore it up or endure a deeper trade battle more difficult.   Bidu (BIDU) posted financial results that saw the company lose money for the first time in 15 years. 

Bye -Do

China Challenges

• Rapidly Slowing Economy
• Mountain of Debt
• Trade Battle with United States

Portfolio Approach

We are eager to put money to work, but it likely will not be today unless there is a big sell off.  For now, all subscribers should have fresh powder. If you are not a current subscriber, click here to get started today.