Signals & Trading Plan for Monday 8/26/19

Weekend updates
By now you are likely to have read about Friday’s 8/23 fiasco.  There is no doubt that the trade war with China is escalating in a major way.  There are doubts that the problems can be fixed easily and quickly.

There are 3 items that we want to draw your attention to.  Taken together, they are major red flags, telling us that there are plenty of fundamental reasons for Major Pullback2 to morph into a new Down Trend.

First, Fed Chairman Jerome Powell said in his 8/23 speech:  “We have much experience in addressing typical macroeconomic developments under its policy-making framework … but fitting trade policy uncertainty into this framework is a new challenge.”  

Translation:  The Fed has limited power to overcome the economics and financial problems brought on by a prolonged trade war.

Second, the Bank of England Govenor Mark Carney said on 8/23:  “There is a growing risk of a global liquidity trap.”

Third, from Bloomberg:  “U.S. companies are concerned about President Donald Trump’s threats to ban them from doing business in China, and they’re poised to halt new investments if the trade war escalates, the leader of group of top chief executive officers said.”

As we write this, S&P, Nasdaq and Russell futures all gapped down at open, and are struggling for traction.  Yen and Treasury contracts climbed. The yuan weakened and stocks are dropping sharply in Asian markets.

These conditions certainly look very bearish for Monday.

The rest of this article covers:
Updates from market internals
Table of support and resistance levels
Planning your trades

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