I discussed over the weekend the basic idea that the news flows surrounding the current trade war between the U.S. and China would create some crazy volatility. A ratcheting-up of tensions over the weekend sent the indexes gapping down and selling off big on Monday. China imposed more tariffs on U.S. goods while the U.S. sought to accelerate the addition of additional tariffs on the remainder of Chinese goods coming out of China.
For short-sellers, this would have been a difficult situation to handle. The big gap-down at the open was certainly not something one would have expected after Friday’s upside reversal and positive index close. But this is something I warned could happen as the news flow creates gaps both to the downside and the upside.
Monday’s gap-down was followed by a gap to the upside yesterday, as the NASDAQ Composite and S&P 500 Indexes sought to retrace some of Monday’s downside break. This in turn led to a gap-down open this morning, and the indexes looked primed for a break to lower lows. Not too long after the open, however, the indexes quickly found their feet and began marching toward the UNCH line.
And then, the news hit.
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