The indices bounced as President Trump made some vaguely positive comments about trade at a press conference but there isn't likely to be any concrete news today. The tariffs will go into effect tonight and I expect that there were be some comments about progress tomorrow but it is still going to take weeks to put a deal into place.
That may satisfy the market in the short term but market players are now much more skeptical and that is going to lead to more bouts of downside when progress is slow or if there are threats of more or increased tariffs. A deal will likely emerge but it's not going to be easy and the market is going to be volatile while it awaits.
In this sort of environment, I focus on two tasks. The first is to try to find some index trade setups as the action becomes extreme. As I noted on Twitter, I took a long trade in the ProShares UltraPro S&P 500 ETF (UPRO) which moves at three times the rate of the S&P 500. I already flipped the majority of it and will look for another setup to develop.
The second important job in this market is to work on identifying the right trade vehicles. For example, on the big cap side I have interest in names like Twitter (TWTR) , Zscaler (ZS) , Qualcomm (QCOM) and Microsoft (MSFT) .
There is significantly bigger potential in small caps that are unfairly sold in this market but also much higher risk. One name I bought on weakness today was Axsome Therapeutics (AXSM) and there are others such as The Rubicon Project (RUBI) that I like as well.
Overall the selling is well contained today. There are few signs of panic and there are bids. It is likely that there is some optimism about something positive on trade that is preventing more aggressive liquidation. There is still a very high risk that the trade negotiations will go badly but at the moment there is some hope to contrary.
(Microsoft is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells MSFT? Learn more now.)
