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Market Lab Report - Pre-market Pulse for Monday, March 5, 2018

All major averages except for the NASDAQ Composite and NASDAQ-100 are below their 50dmas. Friday's bounce was on lower volume as institutions remain tentative on whether Trump's proposed tariffs will pass into law. Trump showed no signs of backing down from his tariffs proposal despite history showing that such plans reduce both U.S. imports and exports. In fact, Trump has been as confident about tariffs as Herbert Hoover whose Smoot-Hawley Tariff was an economic disaster, exacerbating the depression. Interestingly, about a week before the great crash of 1929, the Senate continued to support Smoot-Hawley, then on 24 March 1930, it officially passed the Senate. Here is the chart again for perspective:

Tariffs can spark trade wars so can topple markets. Tariffs have been relatively low during the second half of last century, but context as always is key, so a 25% tariff on steel and 10% on aluminum are quite significant jumps as illustrated below.

Meanwhile, the global economy is on fragile footing so this could derail the recovery and burst the QE sovereign debt bubble. Should economic growth soften, central banks have little room to move rates lower which are still at or near all-time historical lows. Our leading stocks have resisted the downturn but should major markets continue their fall, leading stocks will get taken down along with the rest of the market. Any long position carries significantly greater risk in this risk-off environment, though Wyckoff undercut & rally formations, as we have discussed in prior reports and in our webinars, continue to work. That said, always maintain tight stops especially in risk-off environments such as this one.
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