Daily Commentary: February 03, 2025

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Why Is Trump Doing This?

Posted by Pete Stolcers on February 03
www.oneoption.com

Trump tariffs are not going to end life as we know it.

PRE-OPEN MARKET COMMENTS MONDAY – The world is outraged by the Trump tariffs and global economic activity is going to crash. Prices are going to skyrocket and inflation is going to flare up. The stock market is tanking and people are going to get laid off. This is the rhetoric over the weekend.

This shouldn’t come as a surprise to anyone. Trump has been promising this for months. From a trading standpoint (which is all I really care to talk about), if you weren’t positioned for this move, you weren’t paying attention. If you were positioned for this… it’s going to be a great day.

Trump has everyone’s attention this morning and that’s what he wanted. Now he will remind the world of the “Golden Rule”. “The man with the gold makes the rules.” If you want to trade with the country that represents a third of the world’s wealth, here are the terms. He will negotiate from a position of strength. You don’t have to agree with what he thinks or what he is doing, but you do have to understand his behavior if you are going to make money the next four years.

I believe the tariffs on Canada will be very temporary.

I believe that Mexico could have a lasting impact. He is not happy with the boarder situation and he is going to take a very hard line with their President.

The Chinese tariffs could cause supply disruptions, but from an inflation standpoint the Chinese Yuan will get crushed like it did during his first term.

The tariffs are going to complicate trade, but the larger concern from my standpoint is the decline in global economic growth. I am seeing problem areas pop up everywhere. Stock valuations are at historic highs. The market is priced for perfection and the backdrop is anything but perfect.

This is a big gap down below the 50-day MA and AVWAPQ. The market will open below those levels and overseas markets were very weak. I believe that this move lower will cause long-term money to adjust their risk exposure. Resistance is firmly in place and these policies are going to create uncertainty.

For that reason, I believe that we are going to see a Gap and Go lower and we could make it down to the 100-day MA today. I know that is a big move, but I feel that it could be in range. If that is going to happen, we will make a steady move lower in the first 30 minutes of trading. If the market treads water for the first 30 minutes, the damage today will not be as bad.

Support is at the 100-day MA and resistance is at AVWAPQ and the 50-day MA.

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