US stock index futures were mixed in early trade this morning, but sold off sharply on the US open. This was starting to look like a continuation of Wednesday’s tech-led sell-off. Yesterday’s move seemed designed to knock the stuffing out of investors.
Many had initially held back from ‘buying the dip’ after the S&P and NASDAQ fell into correction territory. ‘Buying the dip’ has been a failsafe way to make money for over two years now. Yet there was an initial hesitation to take on additional exposure this time round, mainly due to uncertainty over the Trump administration’s tariff threats.
Just a fortnight ago, both indices hit their lowest levels since last September. But markets began to stabilise last week. Then they soared higher on Monday after President Trump said that there would be flexibility over tariffs.
He followed that up by saying that the ‘reciprocal tariffs’ due to come in next week, could be ‘more lenient than reciprocal’. These comments were taken as a signal that it was now safe to buy equities. But a fresh announcement of a 25% tariff on all non-US made autos triggered yesterday’s sharp sell-off.
This has put investors on edge once again, particularly as it is still far from clear what next week’s reciprocal tariffs will look like. Chart-wise, all the US majors are still in oversold territory according to their respective daily MACDs, but not nearly as oversold as they were a fortnight ago.
Source: TN Trader
This means there’s still potential for a significant upside move. But it would be brave, or foolhardy, to go all-in at this stage given the uncertainty that Trump’s tariff threats are creating. Instead, having been caught on the wrong side a few times recently, it looks as if there are an increasing number of traders who feel that buying the dip may prove to be the wrong strategy this time around.
