The market didn’t budge during a heavy round of news and it was stuck. Today we are getting a breakout.

PRE-OPEN MARKET COMMENTS MONDAY – The market was waiting for news from the Chinese trade talks and the outcome was much better than feared. Trump had mentioned that an 80% tariff level seemed “about right” last week. The 10% base will remain (globally) and China will pay a 20% penalty until they control the flow of fentanyl into the US. They promised to curb that. The reciprocal tariffs will be suspended for 90 days. In total, the tariffs are 30% on Chinese goods.

We didn’t hear anything about China reducing tariffs on US goods, but they have made concessions in certain areas before the meeting.

The last time Trump signed a deal with China, they did not honor it. They did not buy the agricultural products they promised. The trust level is very low and this battle is far from over.

Let’s say that there were no tariffs on China. Their economy is still in dire straights. A credit crisis is looming there. I saw the signs two years ago and conditions are deteriorating rapidly. Bad loan write downs are skyrocketing. Workers have not been paid for many months across all regions and they are protesting. Do some deep digging yourself!!!

There is no love loss between the US and China. I suspect that Trump’s advisors are suggesting a softer approach. The second largest economy in the world is on the ropes and a credit crisis in China would impact us all. I believe it was coming anyway, but the tariffs got us there quicker.

If there weren’t any tariffs for anyone, I still believe economic conditions this year would have struggled this year and that the market would have been in a gradual drift lower. We do have tariffs and they will be 10% across the board at minimum.

The news was much better than anyone expected, but a 30% tariff is still VERY high.

From a technical perspective, shorts are going to get squeezed this morning. Much of the rally will be mechanical now that we are above major resistance levels.

From a swing trading standpoint, what do we do now? You should have no more than a starter short or two on. We were expecting good news on the tariff front so we did not take positions. For instances where we did, we did so knowing that we would take some heat. We don’t act on long candles, we observe them and we use them as a reference.

If the market was going to hit resistance, it would have come on a gap up and a bearish reversal. That is possible this morning, but typically massive moves like this tend to stick. If we do get a gap reversal, we will see stacked red candles instantly in the first half hour. The market will not test the upside, this will get smacked down immediately. That would tell me that longer-term money likes reducing risk at this level and it is not concerned with the short-term short squeeze.

If we don’t see that price action, it will be a sign that buyers are marginally interested.

I feel I have a fairly good grasp on the long term picture and I would need to see a close above the 100-day MA for at least a week before I shift my longer term bias to neutral. I won’t go to bullish because I believe that soft economic data points are coming this summer.

From a day trading standpoint, I would be inclined to take gains on longs on the open. That’s what I plan to do. The rest of the day I will observe how well those gains hold. To be honest, I am much more interested in the short side at this level. I will temper my bearishness and watch. I need to see signs of resistance.

Support is the 100-day MA and resistance is at the all-time high. We’ve moved through all other resistance levels.