How We Can Get Out of the Tariff Tantrum "Box"

Last week, I showed you a chart that revealed a key support and resistance zone at the top of the "tariff trouble penalty box" we were trapped in.

I said that, thanks to a just-right "Goldilocks" employment report, we were poised to break out of the box to the upside.

And indeed, that's exactly what happened...

... until we were walloped by more tariffs.

But, like many of the tariff announcement reactions of the past couple of months, the markets only did a brief one-day drop – more of a "wiggle" – down.

Of course, I have some charts to show you, including one that I think shows us getting back to some higher ground in the near term...

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The Markets Don't Think Much of the Tariffs... Yet

Here's what all of that action looks like...


My position on the tariff troubles is pretty simple – so simple they teach it in Markets 101. The markets exist as a discounting mechanism, which means traders and investors consider the probability of future events and price those considerations into stocks to best reflect those possible outcomes.

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I repeated this theme on FOX Business Network's "Varney & Co." and "Cavuto Coast-to-Coast" shows last week: The markets continue to act like currently enacted tariffs and the newly proposed ones won't stick around for very long.

There are nearly $91 billion in tariffs in place, around $34 billion of those targeted directly at Chinese imports.

What's more, according to the Office of the U.S. Trade Representative, there are plenty "in the mail," with a proposed 25% tariff on $16 billion in Chinese goods and a 10% tax on another $200 billion in Chinese goods in the works.

That would be roughly half the value of everything we import from the "Red Dragon" – and the market can't muster more than a -0.7% drop.

The market is telling us something.

And that "something" is a presupposition that all of the tariff sorties will not stick – and that this is just gamesmanship, posturing, and negotiation tactics.

The market is telling us that this will not end in a trade war.

So I recommended my paid-up Stealth Profits Trader readers "buy the dip" and move on positions in small caps, with a leveraged, bullish "kicker." Both of those positions are in the green; it's a great way to make big profits on small- to medium-sized downturns.

The thing to look for next is how the market, specifically the broadly watched S&P 500, reacts at the key resistance area we're rapidly approaching and that can be easily seen on this chart:


Unless the markets are wrong – always at least a possibility – and the tariff tantrums flare up into a full-blown trade war that becomes priced in, the best play is to continue to buy quality stocks and boot profits with fast trades on indexes when these pullbacks happen.

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About the Author

D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.

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