Need To Know: I Dont Think This Is A Trade War, Says Veteran Wall Street Strategist

The Dow is trying to decide if it’s done diving, after yesterday’s 724-point plunge.

As stock futures erase their losses, Bankrate.com’s Greg McBride is feeling the pain and singing “Mama said there’ll be days like this.”

Investors had better keep their seat belts fastened, given that “the odds of a trade war have grown,” the chief financial analyst adds.

Meanwhile, veteran strategist Marc Chandler seems to have “Bridge Over Troubled Water” on his playlist, and he provides our call of the day.

“People are presenting this as it’s a trade war. I don’t think this is a trade war,” Brown Brothers Harriman’s old hand says in a Bloomberg TV interview, as he reflects on the Trump administration’s plans for tariffs and the reactions in Beijing and elsewhere.

Chandler doubles down on his take in a blog post.

“We have been to this dance before,” he writes at his Marc to Market blog.

“Countries will respond with some symbolic retaliation on a small number of goods that make a little more than a rounding error in bilateral trade, take some measures to ensure that the defection of the U.S. does not lead to an import surge, and appeal to the conflict resolution mechanism at the WTO.”

U.S. wine, fruit, nuts and seamless steel pipes looks like they’re among the areas targeted, with China’s reaction so far not appearing as substantial as feared.

Read more: Here’s why the stock market took the China tariffs so hard

And see: Worried about a trade war? Stock-market investors should think small

Chandler stresses that one safety play isn’t making a convincing move. The Japanese yen JPYUSD, +0.077949% has climbed to its highest level against the dollar since the U.S. presidential election, but he wants to “see some follow through.”

He says the dollar USDJPY, -0.08% has tumbled below 105 yen, but advises watching to see if the buck ends the week below that mark, which is important “both psychologically and technically.”

Key market gauges

Futures for the Dow YMM8, +0.05%  , S&P 500 ESM8, +0.13% and Nasdaq-100 NQM8, -0.14% are higher after being firmly lower earlier. The Dow DJIA, -2.93%  , S&P SPX, -2.52% and Nasdaq Composite’s COMP, -2.43% big tumbles yesterday put each gauge on track for a weekly drop of about 4%.

Europe SXXP, -0.83% is losing ground, after Japan’s Nikkei NIK, -4.51% lost 4.5% and Shanghai’s benchmark SHCOMP, -3.39% shed 3.4%. Oil   CLK8, +0.53% and gold GCJ8, +1.37% are gaining, while bitcoin BTCUSD, -1.89% trades around $8,500.

See the Market Snapshot column for the latest action.

The quote

“All the products on the list are small potatoes, and the real important ones are U.S. farm products like soybeans and sorghum. China is keeping its powder dry.” —An unnamed government adviser in Beijing notes the Chinese government is leaving itself room to escalate or negotiate.

Check out: U.S. soybeans would be China’s biggest weapon in a trade war

And read: How investors can protect against a trade war — in one sentence

The chart

While Chandler sounds soothing, the High Chart Patterns Group is getting alarmed.

If the S&P 500 SPY, -2.50% falls to its 200-day moving average, newsletter publisher HCPG plans to be betting against stocks in a big way.

You only want to buy the dip when you see a longer interval between drops to that closely watched chart level, HCPG suggests in the above tweet that provides our chart of the day.

And here’s a bonus chart:

The buzz

“It’s not the end of the world, but conditions are pretty ripe for bounces to be weak and a nasty stock market,” says StockTwits co-founder Howard Lindzon. “Now is a good time to be working on the micro,” because “focusing on the macro ... will zap your energy at the worst possible time.”

Does this seem like a great day for a trading debut? DropBox shares DBX, +0.00% were expected to begin trading today after the company priced its IPO above an expected range.

At least one person has been killed today in a hostage-taking situation and possible terrorist attack in a supermarket in France.

Nike NKE, -2.91% looks set for an up day after its earnings late yesterday, while Micron MU, -3.52% appears on track for a fall following the memory-chip maker’s results.

See: Micron bets that memory demand is here to stay

In other political news, policy hawk John Bolton has become President Trump’s national security adviser, replacing Lt. Gen. H.R. McMaster, and former Playboy model Karen McDougal says Trump tried to pay her after a 2006 tryst.

On the data front, durable-goods orders are on tap before the opening bell, then new-home sales arrive after trading is underway.

Check out: MarketWatch’s Economic Calendar

Three Federal Reserve officials are due to speak, with Minneapolis Fed President Neel Kashkari and the Dallas Fed’s Rob Kaplan talking in the morning, while the Boston Fed’s Eric Rosengren grabs the spotlight after the closing bell.

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