The United States and China are taking their trade war to the next level.
For its part, the U.S. has put basically all of the imports from China on the tariff list. And it's gone after individual companies like Huawei for intellectual property (IP) violations.
On the China side, additional tariff increases have been made, and in the last 24 hours, Chinese television ran a story about a possible export ban on rare earth minerals to the United States. These minerals are critical components in smartphones, batteries, computers, and almost all things electronic (especially those benefiting from miniaturization).
And that could just be the start to the tensions, as the race to be the first to supply 5G coverage - an opportunity that could be worth $12.3 trillion - intensifies.
As I write this, we are on track to have the lowest prices on the S&P 500 since March of this year. The equity markets have been directionless and volatile for almost three weeks - a singularly difficult market type to trade.
Now let's take a look at what the charts tell us...
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
The Picture in the Market's Not That Dark
While markets are set to open below the S&P 500's "line in the sand" at 2,800, it has not yet had two or three closes below that level:
This Book Could Make You a Millionaire: The secrets in this book have produced 42 chances to double, triple, and even quadruple your money this year alone. Claim your free copy...
I say that we need "two or three" closes below the 2,800 mark to break the support level (or a very clear and strong move through to the downside) because we have to remember that support and resistance levels are just that - levels or zones - they are not single points on the chart.
It's also interesting to note that 2,798 is the mathematical number for a 5% pullback from the all-time closing high made back in late April. So far, we have not had a close at or below 5%. And at the end of the May, that shows how strong this year's price action has been.
The chart below shows how many times the S&P has had a 5% pullback in each year dating back to 1990:
I've put an oval around the average number of 5% pullbacks - which is 3.3 per year dating back to 1990.
Learn How to Turn $500 into $1 Million: This Sunday School teacher's "retirement career" made him a millionaire. This book will teach you how you can do it too. Claim your FREE copy...
Even if we close today below the 2,798.5 number on the S&P 500, it only means the first 5% pullback of the year. This is a just a reminder to us all that while pullbacks can be uncomfortable, they are just a very routine part of the trading and investing world.
The bottom line for me is that traders and investors aren't yet showing much indication that they're pricing in a big downside push because of the trade war. The Volatility Index (VIX) is still well below 20 and hasn't really had a very big reaction to this whole trade war mess. That means that options traders are not demanding a very big risk premium despite all the posturing that we see in the headlines.
You're Missing Out on What Can Be HUNDREDS of Winning Trades
Once you see how many folks have been snagging up hundreds of double-, triple-, or even the occasional quadruple-digit wins, you'll be blown away by how easy it can be. Seriously, D.R. does all the heavy lifting for you. And he's ready to show you how you can live a life you've always dreamed of - with minimum time and commitment. He and his pattern do the heavy lifting. Find out how to access every training video, trade alert, and paycheck alert. Click here to learn how.
Follow Money Morning on Facebook and Twitter.
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.