Tariffs Seemed Like Big News, but Were They Just Another Narrative?
145% Tariffs on China should be a big deal. But the market doesn't seem to care.
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No one cares about the tariffs anymore. I always thought it was just another narrative, but now I’m sure of it. After all, how is it we got a headline that President Trump has no intention of changing the 145% tariffs on China, and the market fell a smidge? A month ago, we would have been down two percent on such news.
This is exactly why I am so bad at narratives. I have no idea what the market cares about now, but one thing I am certain of: at some point in the next few weeks, we will hear a new narrative.
In the meantime, the market is doing a decent job of working off that overbought condition that developed late last week in Nasdaq. Just look at the Nasdaq Momentum Indicator and how it has come down, and Nasdaq has pulled back. It’s a loss of upside momentum. And as I keep reminding you, we ought to pull back and rally again, which is still my view.
It has to do with the intermediate-term indicators. They are not yet overbought. I expect them to get that way sometime in mid to late May. That is when we can assess where the breadth indicators are.
The McClellan Summation Index is still heading upward. That means breadth is fine. If that changes, that’s a problem. The Hi-Lo Indicator for Nasdaq is starting to nag at me a bit as it rolled over some more.
But it is sentiment I am focused on this week. The Investors Intelligence survey clocked in with a more equal amount of bulls to bears, but the bears still outnumber the bulls by a point or two. The Bulls now stand at 32.1% while the Bears are at 33.9%. If the market does not fall apart (my expectation is that it will not fall apart) in the next several days, I believe we will finally see more bulls than bears next week. In the meantime, the shift is evident because the bulls are now up ten points in the last few weeks.
Then there is the put/call ratio. Wednesday’s reading of 0.80, is the lowest reading since it was 0.78 on April 11th. But on April 11th the ten-day moving average was coming down from a reading of 1.07. The ten-day moving average is now knocking on the door of 0.85. Readings under .85 on the moving average tend to say, okay, folks are back in the pool.
There will be a lot to pay attention to as we get into mid to late May. I am still eyeing the week before Memorial Day as the point we are likely to get intermediate-term overbought. My guess is the narrative will change before then. Just a guess!
