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New Tariffs, Same Old Reaction

Jim Giaquinto
New Tariffs, Same Old Reaction

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The market had another rough morning on news that President Trump wants more tariffs on China. The pattern of the past few days held true as indices came well off their lows by the closing bell...but none of the Big 3 managed to end on positive ground.

POTUS is looking to add 10% tariffs on $200 billion worth of Chinese goods…and promised $200 billion more if China again retaliated. The news comes only a few days after announcing 25% tariffs on up to $50 billion of Chinese imports to go into effect on July 6.

At their lowest points of the session, each of the major indices had plunged about 1%. However, the NASDAQ ended the session lower by only 0.28% to 7725.6, while the S&P slipped 0.40% to 2762.6. Small caps continued to lead the market as the Russell 2000 pushed through a 0.06% gain to 1693.5.

But when you’re wondering about the impact of all this trade talk on the market, you’ve got to look at the Dow. The index of industrial bellwethers like Boeing and Caterpillar shaved off more than 100 points from its low of the day, but it still was in the red for a sixth straight session. It dropped 1.15% to 24,700.2. It is now negative for the year.

“Markets still think that there could be a deal before tariffs actually go into place. Trump is obviously strong-arming China right now. The question is, who will cave first?” said Jeremy in Counterstrike.

Meanwhile, four portfolios cashed in double-digit winners on Tuesday, including a more than 30% gain for Technology Innovators after selling one of the hottest tech stocks. The other three portfolios also bought today. Learn all about the moves and more in the highlights section below:

Today's Portfolio Highlights:

Technology Innovators: Stocks are suffering through a rough session this Tuesday…and yet streaming giant Netflix (NFLX) is having a pretty good day. Brian Bolan decided this was a good time to book his gains on this winner, and so he sold NFLX for a more than 37% return in a little over two months.

Counterstrike: The latest volley in the U.S./China trade fight has the market slumping and Jeremy making adjustments in the portfolio. On Tuesday, the editor added SolarEdge (SEDG) with a 12% allocation. Shares of this Israel-based residential solar installation company have plunged in the past couple of months, but Jeremy thinks its recent bounce off the 61.8% Fib line could be foreshadowing a huge surge to $79. Best of all, SEDG has beaten the Zacks Consensus Estimate for 12 quarters in a row and should be shielded better than most spaces from the ongoing trade rhetoric.

By the way, the portfolio also got out of several positions on Tuesday, including selling half of Salesforce (CRM) for a nice gain of about 20% in just a little over two months. Read the complete commentary for more on these moves and for a look at the charts.

Stocks Under $10: With the portfolio being fully invested, Brian Bolan needs to sell a name before adding a new one. Luckily, he has a double-digit winner that’s all set to be cashed in. Energy XXI Gulf Coast (EGC) has agreed to be bought out, so the editor thought this was a good time to take a 12% return in less than a month since he believes the upside is limited from here.

The new buy taking over this slot is Vuzix (VUZI), a Zacks Rank #2 (Buy) maker of Smart-Glasses and Augmented Reality (AR) technologies. The editor likes the company’s projected revenue growth for this year and next, along with the “massive” 27% short position that could be squeezed as the stock moves higher. Read the full write-up for a lot more on these trades.

Zacks Short List: All three stocks that left today were positive, and they included a double-digit winner. The short-covered names were:

• TAL Education Group (TAL, +14%)
• Schlumberger Limited (SLB, +5.4%)
• Zayo Group (ZAYO, +0.1%)

The new buys that replaced these names are:

• Agnico Eagle Mines (AEM)
• NetScout Systems (NTCT)
• Tencent Holdings (TCEHY)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Momentum Trader: "When you’re in the trenches, it’s tough to get a gauge on what’s really happening out there. You can’t fully understand where you are in the grand scheme of things. Think back to February of this year. Stocks were under pressure and most averages were approaching their 200-day moving averages. It felt like the end of the world. 

"Inevitably, the small caps of the Russell eventually found their way on through that resistance up at 1,600. The last month or so has been a long, slow, drift to the heavens. Who would have thought we’d be here after those rough days to start the year? Well, if you zoom out a little bit and look at the chart in hindsight, it feels rather logical. The 200-day has provided support for several retracements of the Russell, boosting prices each time.

"The great thing about trading with the trend is you’re going to be right many times while you can only be wrong once. For those of you out there trying to gauge the exact moment when the trend will end…stop. Trying to pick tops and bottoms is tough because you can only be right once, with perfect timing. I’d rather be right multiple times and be wrong once then be able to pat myself on the back for calling a top."
-- Dave Bartosiak, who also heads Surprise Trader and Blockchain Innovators.


Have a Good Evening,
Jim Giaquinto

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