Deal or No Deal

Dip buyers need more

Precursor

This is a bearish report. If there is no material significant gain from this weekend’s US/ China talks in Switzerland, this all will get worse. Should material improvements come through Sunday/Monday morning, markets will continue with the power rally to the upside. It’s that simple.

In This Report

Chinese shipments arrive with 145% tariffs ● Manufacturers pass on costs ● JPMorgan sees 60% recession probability ● Fade the fade ● Private credit expands ● Bitcoin mining margins tighten – how to make coin ● Freight automation accelerates ● Trade setups below

View

We may be at the end of a bear market rally. ES has pulled back to an area where my edge tells me significant selling pressure is likely- see Trade section below.

I discussed this setup with Jason Shapiro on Friday. We had a great exchange about it, though to be clear: I do not speak for his views or positions.

The current narrative is that the market has shrugged off the underwhelming UK trade deal (10% tariffs still in place), but let’s not forget, the UK isn’t a meaningful enough partner to prompt lasting market direction. The real test comes as the U.S.-China negotiation narrative continues to shift. Meetings in Switzerland are underway.

Buy the dip search term on Google: The Economist.

---

Articles

• China, US hold talks on tariffs in first bid to de-escalate trade war

• The first boats carrying Chinese goods with 145% tariffs are arriving in LA. ‘‘Shipments are cut in half. Expect shortages soon.’’

• How American business can prosper in the new geopolitical era

• Buy the dip: the trend that keeps stocks from crashing

• The growing role of private credit

• The outlook for the Euro and the British pound amid rising US tariffs

• The economics of Bitcoin mining: A review of Abundant Mines

• Driverless freight trucks begin barreling through Texas

---

Calendar

---

Earnings

Highlights will be CSCO 0.00%↑ on Wednesday, WAL 0.00%↑ on Thursday.

---

Macro

We may be nearing the end of a bear market rally. ES has pulled back to a key zone where my edge signals significant selling pressure. See the Trade section below for the technicals.

Right now, China and the U.S. are meeting in Switzerland, and a sweetheart deal may emerge. But my edge is my edge. The sellers will likely attempt to take control from Friday’s close, or even allow for a 2% flush higher before stepping in. So it is key to monitor chatter out of Switzerland through Sunday.

The only thing that invalidates this setup? A clear influx of buyers strong enough to lift us decisively above last Thursday’s highs. Until then, I remain cautious. Headlines from the China talks can move the needle either way now DRAMATICALLY- but structure leads, noise follows.

Powell has correctly held firm, keeping policy unchanged. While that stance remains, the U.S. faces the real risk of double-digit inflation- see below for why. In contrast, the EU and broader G7 are entering a phase of easing inflation and falling central bank rates, creating a stark divergence in monetary outlooks.