US wants to tariff the world and its main target is China.  The technicals say that China has it much worse than we do. This will be a war where everybody loses. 

While I’m a pure technical trader, I find the news lately very interesting. People think that China can beat us at a trade war. After the move today in the SP500, even though China will be the bigger loser, we look like we’re setting up for a loss too.

I remember when Republicans were for free trade.  I remember in college debating a ton of liberals the benefits of free trade.  If we would have entered a trade war with China and we had entered the TPP, we would have the backing of other countries in Asia Pacific setting us up for a pretty big win and stifling China.  Instead, we decided to go the populist route and get out of TPP.  While China gets the upper hand in the global war games, they will feel the pain we inflict on them.  

If we look at the large cap ETF for China, we see that this week we broke the uptrend channel.  They’re dropping, and pretty hard.  We should hit the first blue line and maybe bounce from there, but I see us going to the lower blue line.  We’re already at a 24% drop from the highs and the drop I see coming is an additional 10%.  Holy shit, China is fucked.  China does have something up its sleeve that Wags and I were talking about in the chat today, and that is devaluation.  Those fuckers are going to devalue their currency and it will be their only option.  With a strong dollar and higher prices (due to tariffs), it looks like we’re out to fuck the rest of the world, so it may be a trick that has promising upside for the Chinese. Time will tell. 

As for where we are…

We broke the top half of the trend.  Funny how this is lining up as we are on the way to hit the blue line.  We should (0 guarantees in life) bounce up from there.  With that said, Wags was pretty enlightening today as he saw something I didn’t.  Sometimes I can be human and miss shit, but he saw a pattern in the works that many traders trade. 

Holy shit it’s a head and shoulders on the daily! Why is it traded? Because it’s a 55% chance of reaching it’s target.  Too bad for investors….its target is to the downside.  If you see the blue line, it not only acts as support, but it also acts as a neckline for the pattern.  We’re stupid for charging tariffs.  We’re stupid for walking away from free trade deals where we can exploit cheap labor and get quality products at a great deal.  For an administration that likes to tie itself to the market, it is stupid to do so. If the market is going to catch up to fundamentals…I would distance myself from it.  You cannot go up a few hundred points on the Dow and yell “MAGA!”, followed by steep losses and say, “We’re in this for the long run.”  It doesn’t work like that.  

I’m currently short looking to close a lot into the blue line.  I will be shorting into strength on the bounce.  Stops above the head.  The shittiest part about this is that the left shoulder was over 3 weeks of trading.  If the right should takes the same amount to form, it will be a choppy and boring 3 weeks.  It will also make sense because of the summer break in trading.  This will bring us to sell off just before Europe takes off for holiday in the month of August.  

Come join the chat and talk to Wags and me and a few other traders about the market and also grab some great shorts like I was giving out this afternoon. 

-RM 

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