Are the Tariffs Old News?
People have talked about tariffs for so long now, that all of the news may already be reflected in stocks' prices.
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The market has a thing about deadlines. They tend to be well-telegraphed so that everyone knows about them in advance. The evening news tends to lead off with them as we get closer. And heck, some television stations and websites will even use a countdown clock.
That means folks will tend to prepare in advance for said deadline. Think about all those debt ceiling countdowns. Think about all those government shutdowns.
Yes, I know President Trump will announce his plan for tariffs on Wednesday afternoon. I also know that if you didn’t know this already, you have been under a rock for a month.
Maybe all that selling we’ve seen over the last six weeks was in advance of said tariff announcement.
The market is back, or pretty close to, an oversold condition again. And the Nasdaq Hi-Lo Indicator is back to .19, which is oversold. I did not think it would get there so fast, but that huge reading of stocks making new lows on Monday helped it tumble back down.
The majority of stocks have been in a downtrend since October. Just look at the McClellan Summation Index. It peaked the first week of October, and it hasn’t made a higher high since. This tells us what the majority of stocks are doing, and they have been heading down.
Does that make this a bear market? By the conventional definition, we’d have to see a decline of twenty percent, and even the Russell 2000 is only down 18%. Although if you need it to fall another two percent to confirm what we all know, then so be it.
The selling has been persistent for a lot longer than the last six weeks. It’s just that in the last six weeks, the index movers, namely the tech stocks, but also stocks like JP Morgan and Goldman Sachs, have been the target of the sellers.
To me, that means the group that is the most oversold is the technology sector. These stocks have been the worst performers for the last six weeks. And those tend to be the stocks that rally in an oversold rally.
What if we don’t get the panic? We can still rally, but I think the rally would be more choppy rather than straightforward. Since panic is a way to clean things out, we tend to get more vigorous and lasting rallies after a panic.
What if it turns out people haven’t done that much selling, and stocks take a big tumble after the announcement? Well, then that would give us the panic I so desire.
In other words, we are set up to rally, the question is how we get there. And no matter what the outcome, I continue to believe the market in 2025 is more about trading than it is about getting comfortable and setting it and forgetting it. Those tech stocks have left big tops overhead (see the SOX chart we’ve been staring out for months now), but they can still rally back to resistance, can’t they? Don’t fall in love.
I will end by noting the Daily Sentiment Index on Gold fell back to 80 on Tuesday, so it missed that reading over 90. For now!
