Going into the weekend, traders often wonder if the market will repeat what it did up to that Friday. Was a rally or a sell-off a fluke? Will great news or bad news over the weekend affect their current positions?
These questions are surely in traders minds this Friday, especially given the news that hit the tape Thursday. The US decided that it will raise tariffs on the European Union (EU), as well as its neighbors, Canada and mexico. What’s more, the US reportedly is considering a total ban on German luxury cars. This, however, is may just be bluster.
Of course, it didn’t end there. The EU responded with proclamations of increased tariffs on the US. Canada and Mexico didn’t waste any time either – both declaring new tariffs on US goods sold to their respective countries.
One would think that this is very bad for global trade and therefore bad for corporate profits, which would lead to lower stock prices. However, anyone thinking this would be wrong as stocks have soared higher Friday, marking yet another amazing reversal from the prior day.
The chart below shows the S&P 500 reversing back into its prior congestion zone.
So weekend thoughts will surely be, by a few anyway; How can this news be bullish?
Perhaps the market is already discounting a truce between all countries over the weekend. Perhaps, but what if it escalates instead? Next week should be interesting.