The Donald definitely didn’t get what he wanted from the Fed meeting last week. Not only was it just the 0.25% cut instead of 0.50%, but also clear remarks that this is not the beginning of a steady series of rate cuts… Damn.

Then that same day, Trump goes against his advisors and slaps 10% tariffs on another $300 billion of Chinese goods. The Chinese have retaliated by letting the yuan break above 7 to the dollar — a line which they have defended until now.

That is a clear sign that they do not see a trade deal anytime soon and they will continue to let the yuan devalue to boost their exports and disfavor ours…

So, double whammy!

Hence, the market has declined more than 6% since, and the megaphone upper trend lines are proving to be the formidable resistance I expected and the downside is favored for a while now.

Now the more bullish scenario would see the markets retest their June 1 lows down 11% from the top and then break back up towards my most bullish targets of 33,000 on the Dow and 10,000 on the Nasdaq by January to March next year. We would have to see a breakthrough on the trade deal or the Fed switching to a stronger easing posture for this to happen.

The more bearish scenario — back to new lows over December and as low as 20,000 on the Dow and 5,700 on the Nasdaq — would become more likely than before and that should occur by late October. Then we would have a more open bullish scenario that could peak later next year.

Such a scenario would work out better for Trump’s re-election as he would first get much stronger easing by the Fed and then the market could hold up later before crashing on his parade.  Image: AP