Will Liberation Day Free the Bulls or Drive a Deeper Market Correction?
Trading action the last couple of days indicates many want to buy this market. What will it take for them to put more cash to work?
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President Trump is scheduled to announce his tariff program at 4 p.m. ET on Wednesday. There is growing hope that he is softening some of the terms, and that has helped the market rally intraday on both Monday and Tuesday.
Poor market action, combined with some weakening political support, is likely forcing Trump to pare back some of his more aggressive inclinations. The president has always been sensitive to the stock market's response to his policies and is likely wary of strong negative reactions.
The primary question investors face is whether increased certainty about tariffs will help to drive a relief rally. The positive action that has occurred in the last couple of days indicates market participants want to buy this market but they need some positive news to put more cash to work. Simply knowing what tariff policies will be may be good enough.
Even if there is a positive reaction to Liberation Day, it is likely just the beginning of more tariff drama. The European Union and Canada have warned that they will respond, and there is the danger of an escalating trade war. On the other hand, Israel and Vietnam have indicated that they are eliminating all tariffs on the U.S., which is the goal that Trump is seeking.
Libration Day is likely to be just the start of protracted negotiations, but the good news is that it sets a floor and will finally provide some certainty for a market that is desperate to have more information so it can start to discount the impact.
Unfortunately, the market is facing several other major issues in addition to tariffs. Estimates for first-quarter GDP are dropping, there are signs of sticky inflation, economic growth is slowing, and there is some weakness in the jobs market. Upcoming data will be particularly important, but at least the market can start to factor in how tariffs will impact the economy.
The biggest problem right now is very poor technical action. The indexes are broken, many individual stocks are already in a bear market, and the Magnificent Seven MAGS names are no longer leaders. There is no strong leadership currently, as the AI theme has lost its luster.
I'll be focused on chart development. While there are many interesting opportunities due to the market weakness, charts need to build support and generate upside follow-through before they can be trusted.
We have a weak open again Wednesday but dip buyers have shown up the last two days as hopes for tariff clarity have increased.
At the time of publication, Rev Shark had no positions in any securities mentioned.
