Street Calls of the Week
Stocks had a down day on Monday, as President Donald Trump announced the tariff rates that will take effect for several countries, including Japan and South Korea, at 25% on August 1.
Individual investors can choose to believe what they like on the topic of tariffs and if they think he is negotiating or not, and will once again chicken out. Unfortunately, that is the danger of things, given the President’s past handling of these trade deals, investors believe he will follow suit. The risk is that he won’t chicken out, and the tariffs stick and the truth is that no one knows.
Anyway, the stock market reacted as it should, and whether the declines build or not will depend on investors’ beliefs, but perhaps more importantly, how the algorithms respond. For now, the S&P 500 is above the 10-day exponential moving average, and until that moving average is broken, there is not much else to say if you are looking for lower prices.
Again, we have passed the theta burning time of July and are now back to regular trading, so we will soon find out whether the rising wedge pattern has a throwover or not.
Not surprisingly, we saw both realized and implied volatility rise on the day. We will have to see how things unfold. If the movement intensifies and realized volatility starts rising more rapidly than implied volatility, then things could get interesting.
Meanwhile, as I noted earlier yesterday in more detail for members, the dollar appears to be in the process of potentially bottoming here, as it makes a higher low on the RSI while making a lower low on the price chart. The dollar index also rose above its 10-day exponential moving average yesterday, suggesting that a significant dollar reversal may be on the verge of occurring. The trend lines around 98.25 are the next major test.
Big Change In Trend For The US Dollar
The next update is expected to arrive on Wednesday.