On Thursday night, April 5, 2018, after markets closed, the news hit that President Trump has ordered an additional $100 billion in tariffs put on Chinese goods.
Alright guys, this is a trader alert! You need to get out of the stock market. Unfortunately, we are long Amazon stock. We are going to have to take a big loss at market open tomorrow. Alright I’m so sad about this, but its got to be done. Alright. I’ve weighed the risks of just staying in Amazon stock and there just not there folks. Okay, so, looking at the market action, you know, and depending on how much overnight futures drop, we could be looking at, maybe a 2% to 2.5% gap down open in markets.
I do not expect that holding on to Amazon will gap fill as the market rises up and fills the gap and then trade war fears just kind of ease off and the market just ends up going up for the day. I don’t see that happening.
[President Trump speaking]
I’ve been telling you that the trade war officially has already been underway. One particular problem, and I view them as a friend I have tremendous respect for President Xi. We have a great relationship. They are helping us a lot in North Korea, and that’s China. But we have a trade deficit, depending on the way you calculate, of $504 billion know some people would say it’s really $375 billion. Many different ways of looking at it. But anyway you look at it. It is the largest deficit of any country in the history of our world. It’s out of control.
We have a tremendous intellectual property theft situation going on which likewise is hundreds of billions of dollars and that’s on a yearly basis. In particular, with China we’re going to be doing a section 301 trade action. It could be about $60 billion but that’s really just a fraction of what we’re talking about. I’ve been speaking with the highest Chinese representatives, including the president, and I’ve asked them to reduce the trade deficit immediately by $100 billion. It’s a lot. So that would be anywhere from 25% depending on the way you figure, to maybe something even more than that, but we have to do that.
Meanwhile, the mainstream media keeps saying, well you know, they threaten a trade war. It’s a threat of a trade war, and I’m like no, a trade war is already gone ongoing.
This is what happened folks, and I’m a little frustrated with the Trump administration for how they did this. It was approximately 5 PM Pacific time in the US when the news hit that President Trump proposed $100 billion in additional tariffs on Chinese products. A hundred billion.
President Trump said that he has instructed the United States trade representative to consider 100 billion in additional tariffs against China. Shortly after Trump’s announcement, US trade Representative Robert Lighthizer expressed support for the move, calling Trump’s response appropriate.
Dow Jones futures tanked on the news with the implied open down more than 400 points. I’m looking at overnight S&P 500 E-mini and NASDAQ E-mini futures and they don’t look good folks. They are down, the S&P 500 E-mini futures, is down 1.16%. The NASDAQ E-mini futures are down 1.19%. So I think we get a gap down open at least if things hold the way that they currently are.
What I’d like to do is basically pull up the chart of the NASDAQ and basically we’re going to keep an eye on that 200 day moving average. That would be something else If we get a gap down open and then a big red candle like we had back on you know what is that April 27th? Big red candle and we go back and we test that 200 day moving average. It could happen folks. So what I’d like to do is try to play a TVIX scalp, but I think to do that, to play the TVIX scalp, I wouldn’t want to go long TVIX necessarily on the gap down open. I don’t know. I’ll have to look at the market action but I will send out premium members at text alert if I go long TVIX. What I’d rather do though is have a gap down open, have the market go up a little bit, partially fill, and boom. That’s when I take the TVIX long as the market rolls back over and then takes the next leg down.
I really feel that President Trump should’ve come out and said that he was, you know, that he had done this during regular market hours, during trading hours. That would’ve given us time. That would have tanked the market, obviously, but that would’ve given us time to turn around and sell and get out the market as quickly as possible. Not only was that not done but even, it was done so late that we didn’t even have the opportunity to trade in after-hours, to sell and get out. So even, it was so late, that even after-hours trading was done at what, 8 PM Eastern time?
One of the things that I really am solid about getting out of the market. I’m so glad that I’m in gold in my 401(k). That’s my slow moving money. One of the reasons why I think this is so unbelievably bearish folks, is that, alright so if you look at the sovereign wealth fund ranking that is the sovereign wealth funds. These are funds that, that country’s have, okay and countries use to run the basic services that they provide for their people. These are the world’s largest funds, okay? They’re sovereign wealth funds and if you look at the top 10, the ranking of the top 10 sovereign wealth funds by size, you’ll note that China, okay so China’s number two right here, and then China takes spot number six, and seven, and then spot number 10. So China has four sovereign wealth funds in the top 10 biggest sovereign wealth funds. That’s unbelievable folks! No other country occupies four spots in the top 10 biggest sovereign wealth funds. What this means, I mean that’s shocking folks, okay? But what what this means is that China has a lot of investments inside the US, or in companies that trade on US markets and we don’t know how big that dollar amount is. I’ve tried to get numbers. I’ve been researching that for the last few hours. I can’t find it. Nobody knows. But you can kind of guesstimate here that if four of the, of of the largest sovereign wealth funds in the world, four of the top 10 largest sovereign wealth funds four, are all from China, then you can you can very well bet that China’s investments in US companies and US stocks in this country are huge.
We have never had a trade war against another country, that is the size of China. It’s never happened folks, okay? China’s that huge. Just yesterday Jeffrey Gundlach went on CNBC and said that we could be making the same mistakes that were made during the Great Depression. Now Jeffrey Gundlach is pretty awesome when you look at his bond funds. I mean he’s just amazing. He’s got an excellent track record. Here is something that he said that you really can’t argue, “it’s not a positive I mean it really’s, it is really interesting when I was in elementary school and high school, we talked about the Great Depression. What my teachers told me was that the Great Depression was caused by the Federal Reserve raising interest rates prematurely in a not so strong economy and also the Smoot-Hawley Tariff Act. That’s exactly what we have right now. We have the Fed raising interest rates and now we have a trade war, a trade war that’s going to make the Smoot-Hawley Tariff Act trade war pale in comparison.