Political opposition to Mexican tariffs is helping the indices bounce back this morning. There is talk that the Republicans may look for a way to block tariffs, but the important issue here is that the support for tariffs is very thin and there will be extreme pressure on negotiators to come up with at least a delay when they start talking this week.
While hope on Mexico is helping out in the early going, there are still a number of other issues. The antitrust investigation of four of the leading stocks in the market -- Apple (AAPL) , Facebook (FB) , Amazon (AMZN) and Google (GOOGL) -- sent investors running for the sidelines. This is an issue that is not going to be clarified quickly, but the emotions have calmed down this morning and there is some bounce. There was severe technical damage done to these stocks and it will take some time for them to find their footing again.
Nothing is happening on China trade right now, but there is hope that Trump and Xi will meet later in the month and move the process along. There is potential for headlines at any time and that will make it hard for the bears to press too hard.
The bigger emerging issue now is the fear that the trade war chaos is weighing on the economy. GDP forecasts are dropping and the talk of a Fed interest rate cut are becoming more pronounced. Fed Chair, Jerome Powell, is scheduled to speak this morning in Chicago. Any mention of the potential for a cut will generate a sharp market response -- and that is part of the reason there is a bounce in the early going today.
The market is ready for some bounce action. But, as I've discussed, counter-trend bounces tend to be big and fast. Market players tend not to be prepared for them, so when they do develop, there is a scramble to reposition and that creates some big moves.
The overall technical picture remains very negative. It will take some time for that to improve. If there is a decent bounce at this point, that will just be the first step in a technical recovery.
I continue to carry very high levels of cash and see very little in the way of individual stocks that offer good entries. This is a market mainly for day trading right now. There are position trades developing, but they require patience and an incremental approach.
We will be dancing around to headlines today -- and with the indices and stocks oversold, the buyers will be trying to catch some short-term upside.