Ep 186: Italy’s Turmoil, Trump Tariffs & Stock Charts

May 31st, 2018

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In today's episode, what we're going to do is take a look at some of the news-driven headlines in the marketplace. Then towards the end, I'll share with you some insights on some of the stock charts, at least the more popular one.

If you want to get some more details about other stocks, maybe a more quantity of stocks then take a look at the critical chart services that I have on the https://tradersfly.com/ website.

The issue that's been going on the Italian turmoil is what shook up the markets and moved it to the downside there on Tuesday. As we look here, Tuesday, 5/29/2018, we were down about 40 points or so on the SP.

We did manage to rally back the next day. The market started to rebound because the market has a short-term memory. As you whipsaw to the downside, you get massive spikes to the upside. You understand that rebound.

But then again today, as you take a look at it, we have this pullback. Stocks now are mixed as Trump sets midnight deadline on tariffs.

Again, he wants to keep pushing these tariffs - taxes upon these import/export goods from other countries from Europe Mexico and Canada, especially for the steel aluminum. He's also trying to do things regarding China.

But now what's also happening, if you've read some of the news headlines, China is trying to collaborate with other countries to kind of bypass the US. In the end, the prices will keep inflating if this ends up happening. If you're not seeing it between prices at the pumps, between prices like on Amazon Prime membership, Netflix raising its rates over the last couple months or six months.

We have a lot of companies that just overall raising the rates. McDonald's, you have Chipotle that raised prices. They have hit their earnings, and it's a positive for the stock. But I'm saying the money that you spend out of your pocket is much more, so you have less. Less money in your pocket to invest. Less money to buy other goods. You're paying more for shipping costs. It's just at the post office a day or two ago, prices have increased quite a bit. I remember the flat rate box for the medium used to be about $10; now it's up to like $15/16.

All these things start to escalate it's like a good 20-30% jump. As these tariffs come in, who's going to burden the cost? They'll raise their rates on the products and the goods, and the US customer will end up paying more. That's usually just the way it works out. In the end, the regular person is left with less.

The Canadian economic growth it also slowed down. The US typically right now is hitting about 2.5/3% economic growth, as far as their calculations are concerned. But as you look at Canadian growth here, even though it's not a populated area compared to other countries like the United States, it did slow down.

Why is this important?

Business is across seas, across borders. So if the Canadian economy is slowing down, what do you think is happening to the other economies? It's not always the case. But if they're shipping less, that means somebody's receiving less. If they're buying less, that means someone is selling less.

That doesn't mean other countries aren't benefiting because maybe they're buying it from other countries and not specifically your country or like let's say the United States.

But in general, if you're a global economy and one country starts slowing down, then the countries that those countries deal business with and that are mixed and tangled, we'll also somewhat slow down. Not in a huge way but slightly. As all of these cylinders start slowing down your country as well will slow down just like I'm talking about the US.

We could also be slowing down because

  • You have drama here in Italy.
  • You have issues here in Canada.
  • The US with their trade problems with China.
  • North Korea drama
  • Interest rates also rising

All these create a little bit of turbulence and problem.

As you look at individual stocks, you know you got GM that spiked pretty good here with some news comparing it to what is it ten years ago - where they struggle to even be on the stock market. And Microsoft passing Google here in market value.

As you take a look here GM, look at that spike, not 11%. Usually, I don't chase stocks that are up this high in a single day, but definitely, you can see it's making a move. It's not one that I would trade or invest. I mean car manufacturers very tough competitive market. But you know it pop in quite a bit.

If you take a look at Microsoft, which is quite surprising for a company that's been around since the 80s, had a nice big spike during that dot-com boom pulled back in 2009. But really, it's keeping up with the times.

A lot of times, it's difficult for these huge companies to keep up with the times but this it's doing quite amazing between their Xbox services. A lot of things that they're producing and a lot of the changes that they're doing.

They're making smart decisions and the company's ability to adapt and grow with the industry. And that's fantastic.

As we look at other individual companies, like Amazon, you can see some of these companies are heading their Peaks. You could see we're coming right into these peak areas.

As you start coming into these peak areas, this could be a little bit of an area of concern or trouble.

When you have such a high bounce, you need time to digest the move. It's like going to eat at a buffet; you eat a ton of food you need some time just to lay down and relax.

The same thing here, you need time to digest.

Anytime you have a pop; you look at these swing points since recently all these have sold off. You can see where we're rolling anytime. This creates a little bit of an area of concern.

If you look at this descending trend line right here, we have a small breakout right there. But even then that falls with some rejection. As you take it out, you could see there are some swing points here.

Anyways, be very careful because the market seems to be weakening.

Even here look at Shopify's right there, the resistance level is a little bit higher. It made a few highs in the past, but overall you're right at that brink where you know it's got a breakout, or it's going to break down a bit probably.

What do I think may happen?

You might consolidate and move sideways between that 2600 and 2800 for a little bit of time. That's entirely possible especially as you take a look here at the weekly this could be a one-year problem.

Keep in mind to let things evolve. You can see any time we get these pops; we're getting more weakness that comes in. And the trickle from the tax cuts went all to stockholder buyback.

If you don't have a lot of investments, you probably didn't get a lot of benefits from that.

Author: Jorge Diaz

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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