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.
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.
Keep reading with a 7-day free trial
Subscribe to The VWAP Report to keep reading this post and get 7 days of free access to the full post archives.