Trump Tariffs Reverse Equity Trajectory
Monthly Data and a Bitcoin Update
The equities took the bullish Apple news and started Friday morning on a complete bull tone but from the get go, the big NY dogs saw selling dominate Apple flows and then the news of the Trump tariffs took over the entire narrative. We did note that the Market Makers would most likely want to see a close in Apple below $240 well they certainly got it as Apple closed at $235.89 +1.59 on the day. The chart structure doesn’t look great after this move on the daily:
Today Apple rejected the the trend channel top once again. This is the first real test of this trend line since it broke down earlier this month. This tells me the sellers are still here and the pressure is for a recycle back down to test the mid $220s.
As far as the Trump tariffs, There will be a 25% tariff on Canada, a 25% tariff on Mexico, and a 10% tariff on China, all of this despite a Reuters report stating otherwise.
We’re certain there will be some unforeseen collateral damage, but we agree with the tariffs overall as it is consistent with Trumps America first policy. As far as these tariffs offsetting consumer based taxation:
Revenue Generation:
Tariffs generate revenue for the government. This revenue can then be used to fund government programs or reduce other forms of taxes, potentially including those that directly impact consumers (like income tax or sales tax).
Indirect Impact: If the government uses tariff revenue to fund services that benefit consumers (e.g., infrastructure, education, healthcare), it can indirectly reduce the financial burden on individuals, even if their direct tax burden doesn't change.
Shifting the Tax Burden:
From Consumers to Importers: In theory, tariffs shift some of the tax burden from domestic consumers to foreign producers or importers. This is because the importer initially pays the tariff. However, importers often pass these costs onto consumers through higher prices. So, the extent to which this truly "offsets" consumer taxes is debatable. Honestly I don’t see the consumer paying the vig, but time will tell.
While tariffs might generate revenue, they can also have negative economic consequences, like reduced trade, higher prices for consumers, and retaliatory tariffs from other countries. These factors can offset any potential benefits from using tariffs to reduce consumer taxes.
Tariffs can disproportionately affect certain groups of consumers, particularly those who rely heavily on imported goods. This can make them a regressive form of taxation, where lower-income individuals bear a larger burden.
As always, we know the economic effects of tariffs are complex and depend on many factors, including the size of the tariff, the types of goods affected, the reactions of other countries, and the overall state of the economy. It's not a simple equation to say that tariffs directly offset consumer taxes.
Anyway the markets really turned the corner once this was confirmed and the pressure was on. Our earlier daily post which noted the strength of the markets and highlighted that our support levels in the SP500 and Nasdaq futures was far below, well by the end of the day this reversal put those markets right back down to test the important areas. When we look at the Nasdaq future, the weekly did close below the 21608 marker:
As far as the SP500 it managed to stay above the 6042.50 area but closed at 6067.25:
Another chart we want to look has to do with gold, Tavi Costa of Crescat posted this on X and its Gold adjusted for the money supply:
What I see when I look at this is a massive potential for a huge upside breakout and would most likely be consistent with the current administrations endeavors and a more robust monetary system with gold being a very integral part of that future. Gold has been in a very consistent uptrend channel and upside wise does target the $3k area, with $2731 being decent support below:
Ok let’s take a look at Friday’s settlements and 5&30 day total net changes to see who the winners and losers for January were and as far as the settles the majority of the markets suffered losses:
As far as the 30 day rolling changes, the top 3 percentage based winners are the Dax +8.70%, Silver +7.19%, Gold +5.79%. As far as the top 3 losers, RBOB -1.11% , Crude -1.02% and the Nikkei -0.72%.
One monthly chart that stands out to us is the US Govt 5Y, we saw a trade above 4.50% and now the monthly closed below there, this setup is technically bullish for yields to continue to fall:
Another monthly chart that is of note is Bitcoin, where the monthly close was its highest ever above $102k but it is currently pressing into the $97k important support zone again, February will be an interesting month and will either confirm the BTC bull move to continue or a close under this $97k will most likely be met with pressure to seek lower prices. It is interesting to note that we have traded around this price for 2 months now despite the consistent and alleged billions in buying from big Wall St institutions and MicroStrategy:
Ok let’s take a look at the MCA CTA Sentiment Tracker where the equities continue to cling to a few momentum based longs, FX is still generally negative across the board and metals continue a bullish bias:
As far as the MEGA8s the outright MEGA8 long return is just above the hedged return value now as last weeks hedge closed out worthless and full premium realized. We will continue to target this 525 to 530 area as our hedge areas and only put hedges on as the market rises into these levels:
When we look at the total MEGA8 market cap chart its interesting to note and something we have stated for quite some time and that is big funds are in there selling out of these and either taking on other positions or exiting for profit and moving to pull a few chips off. The selling has been in the face of continued bulk buying from retail funds, 401k and Mutual Fund types who buy on a consistent daily and weekly basis, but it is obvious all that buying has been sold into. We say this because of the last 4 months or so the MEGA8s have been unable to regain their all time market cap high and are not exhibiting a negative downward trend channel directory:
The 50pMA is our first key this week and for now, seems like the markets are just waiting for a catalyst to sell off of.
As far as the MicroStrategy covered call strategy it is still a losing proposition and from the most recent BTC yield pick up that MSTR is obtaining, we doubt we will hear Saylor promoting that all coveted KPI because its marginal at best:
We don’t want to say that the next graphic troubles us, but let’s just say the history of these covers is very foretelling sometimes:
Ok guys that is a wrap for tonight tomorrows post close earnings spotlight for us is on Palantir Technologies (PLTR), We aren’t sure if the new administration and their cuts will affect this company or not, or if it will propel its growth even further, but nothing will stop the disdain main have for this company. The disdain that ascends from a constant over reach and step into the privacy of all US citizens. Their Gotham product is undoubtedly a tool for mass surveillance and many question the validity of the authorization of such a tool. Anyway the equity has been on a massive rise up 4x over the last 4 months. As far as the breakeven for this weeks options expiry they are looking for a hefty 13.9% move when we target the $82 strike. Lets just say the market makers won’t be happy with a move above $86 or $90 as there is heavy interest there. If we look at the $77/$67 put spread it comes at a cost of $2.36 offering a risk reward payoff of 4.2x.
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