Global markets are down 2% overnight after the new tariff plan was announced.

PRE-OPEN MARKET COMMENTS THURSDAY – Trump has been talking about tariffs for the last year. “Tariffs are my favorite word.” No one thought he would follow through with his plan and they thought he would backpedal given the soft economic backdrop. We even saw a 70 point S&P 500 rally before the announcement… ouch.

The time to act was before the release. You were either short… or not. If you were short, ride the move lower. Big drops like this tend to stick and the news is material. Take partial gains into this drop. You will benefit from a big spike in IVs. Don’t hit bids, offer your put options at a higher price and make them reach for you. They want what you have.

The tariffs are going to have an impact for many months and JPM is now forecasting a 20% correction. Their top notch analysts had projected a 9% move higher in the S&P 500 this year and now that the market is down 12% they are calling for a 20% correction. This is why I am teaching you how to do your own analysis.

This is a big drop. The best thing you can do is to watch. The ideal set up this morning is unlikely. It would be a small effort to get back into the gap and a wimpy bounce would give us time to find stocks with relative weakness. I am not expecting that and if we get it, it won’t last more than 30 minutes.

The most likely scenario is a gradual drift lower where most of the losses are realized in the first 90 minutes. As the drift lower unfolds, do NOT try to buy bounces. We are not likely to see any meaningful bounce until the last 30 minutes of trading and that will just be some short covering.

Stocks that have recently broken technical support and that were NOT able to rally with the market the last two days will be your best prospects today. That is a sign of relative weakness. I would not chase big drops. The better set up is a reasonable drop (not more than a 20-day ATR below the prior low) and a steady drift lower. That is a move you can get behind and ride. I would focus on consumer stocks that might be impacted as opposed to a tech giant (META/GOOG) that won’t be impacted by the tariffs as much.

The chance that any market bounce is going to materialize into something sustained is close to zero. Any move higher will simply provide an entry point for shorts. This news caught the market by surprise and the adjustments will take time (days). This is not your garden variety drop on a bad economic release.

If you are wondering how you are going to make money today, your focus is off. Think about not getting your ass handed to you. That is the proper mindset. Chasing into deep drops is not the way to make a lot of money.

Do you want to buy some puts? Good luck with that. Option IVs are going to be sky high. On a drop like this Market Makers are going to spread the bid/ask wide enough for Ultra Large Crude Carrier to pass through. If you short, short stock.

The time to get aggressive passed you by last week and it came off of the rejection at the 200-day MA. Our next great window of opportunity will come on a failed D1 bounce.

I believe the market will drift lower today and I am fairly confident of that. Watch the price action and gather information. Don’t make any hasty decisons.

You should be largely in cash. This was a binary event and we knew the reaction would be big either way. Don’t lament on what could have been. Cash is king and you have flexibility. Take comfort knowing that your positions are not getting destroyed overnight.

Our chance to make money will come. Let’s see what the day brings.

Support is at SPY $525 and resistance is at $550.