Bulls and Bears Battle to a Standstill
As bulls await positive trade news, bears look for negative economic data.
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Stocks are at a standstill as investors await news about the outcome of trade negotiations between China and the U.S. Bulls are focusing on the potential for progress on tariffs and trade, while bears are focusing on the potential for negative economic news.
The Trump administration has promised positive results from trade negotiations for a while, but so far, the biggest positives have been temporary delays in imposing the most punitive tariffs. No significant deals have been announced, and there appears to be difficulty in closing a deal with India.
The economic bears have been on the wrong side of the action for a while as the economic data fails to confirm the thesis that the impact of tariffs is soon to be felt as signs of stagflation start to take hold. There have been a series of economic reports that have undermined this pessimistic view, but there is an important CPI report due on Wednesday and PPI on Thursday. These reports are projected to show an uptick in inflation and will be very closely watched.
The S&P 500 is hovering at highs but has made very little progress over the last few days. There has been good underlying support, but a couple of weak closes are indications of some nervousness. The Russell 2000 IWM small-cap index has been outperforming and reflects a higher level of speculative interest, but it is the Magnificent Seven MAGS that is holding up the senior indexes. While Apple AAPL has lost its luster, Nvidia NVDA and chips are offsetting that problem.
President Trump made some positive comments about Elon Trump late on Monday, which is helping to boost Tesla TSLA and also impacting the space sector. Meanwhile, IBM IBM has news about the development of a new quantum computer, which is pushing that stock to a new all-time high.
It is a tricky market to trade as the indexes hold near highs, but momentum is slowing, and any spark of negative news could cause a rush to protect profits. Entry points are challenging as there aren’t any sizable pullbacks.
The market has benefited greatly from poorly positioned investors who have been anticipating an economic disaster from tariffs, but that dynamic is slowing as some of the pessimism about tariffs dissipates.
We have flat action in the early going, but interest rates are lower, and bonds have a bid.
At the time of publication, Rev Shark had no positions in any securities mentioned.
