Market Alert - Pre-Market

Futures vs FV: SP -37.70,; DJ -496.36; NASDAQ -107.58

Overnight China announced new proposed tariffs -- already telegraphed almost item for item. The market is reacting as if the PROPOSED US tariffs and PROPOSED Chinese tariffs are in fact in place and the sides are not talking at all. Both posture in public as China did last night and Secretary Ross did this morning, but they are talking right now. China says it does not like to be publicly pressured to do anything. Well, it has not responded to private pressure so what is left? Welcome to the other side of the WTO China: you protect your industries with tariffs already, you structure business so that foreign companies must turn over their IP to China and then the latter uses it to create and market its own goods in the market of its 'partner'. Do you NOT expect other countries to use the WTO to change that?

The irony: China already has a 25% tariff on US autos and is adding another 25% on top of that. The idiocy of China's position is underscored: it ALREADY has whopping tariffs on US goods and it is upset when we say 'no more'? Seriously.

Soy beans: the one curious aspect is that China proposes a tariff on soy beans, the main agricultural item it uses to feed the world's largest livestock population. Yes several Trump supporting states are the predominant bean producers, but China is going to impose a serious price increase on a large swath of its own population. Interesting who will blink on this because -- there are NOT ENOUGH beans produced in the rest of the world to make up the difference. In other words, China cannot just go somewhere else to get the beans as there are not enough to fill in for what the US produces.

In any event, US stocks are struggling along with the rest of the world, less Japan, on the 'trade war' that is still all proposals and talk -- nothing is implemented yet, nothing at all. Lions, tigers and bears, oh my. But . . . the market always overreacts near term.


ADP, March: 241K vs 203K exp vs 246K prior (from 235K)


Earnings beats: LEN; PLAY (but lowered guidance)


OTHER MARKETS
Bonds: 2.752% vs 2.781%. Bonds showing strength in the uncertainty

EUR/USD: 1.2278 vs 1.2269

USD/JPY: 106.16 vs 106.59

Oil: 62.56, -0.95

Gold: 1350.88, +13.50


Futures are off their lows hit 3 hours back, but they are hardly surging in recovery toward the open. DJ30, SP500 going to test the FEB lows again while the other indices play 'catch down' to those two, also heading toward their FEB lows. NASDAQ going to move through its trendline, SOX likely to do the same.

With the other indices likely breaking some near support on the open, the setup from Tuesday will face being upended for deeper testing, but we will see how the bids respond to this lower open, the open we would have preferred seeing Tuesday to help clear out the sellers.
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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