Trump's New Tariffs Just Changed Everything!
In a Nutshell
Markets are rallying on momentum despite negative catalysts like new 10% tariffs on dozens of countries and Middle East escalation. Micron surged over 10% on Bank of America hype and KOSPI strength, but the move is a momentum play, not a fundamental breakout. Caution advised at overbought levels ahead of major earnings from Tesla, Alphabet, and Intel—position sizing and intent (investing vs. trading) are critical.
These notes were generated by AI and may contain inaccuracies.
Markets are more bullish than they are bearish and are definitely safer when going long. An overbought reversal is currently forming and is personally very attractive. This is a high-risk trade as it involves shorting against the current overall market direction and sentiment. Beginners should not copy this approach.
The NASDAQ market is trading significantly higher today despite a lack of positive news. A Korean exchange activated a buy sidecar, halting programs buying for 5 minutes after KOSPI surged 5%. When South Korean markets were dropping and aggressively crashing overnight, they acted as a negative catalyst for the semiconductor space and the overall NASDAQ market.
Oil prices are surging to $85 a barrel after Iran says that it has struck an Amazon data center, which does not sound bullish. President Trump is preparing new round of tariffs up to 60 countries at the current 10% global level, which also does not sound bullish. Over a dozen countries face 10% tariffs.
South Korean markets are propping themselves up higher. The KOSPI has been a huge indicator for the semiconductor and chip space. When South Korean markets drop, semiconductor and memory chip stocks drop, and when they rally, semiconductor stocks rally accordingly.
Micron Technology is rising over 10% as Bank of America adds it to the list of best investment ideas. Bank of America has been adding more of that position to their long-term plays, which appears to be hype rather than substantive news.
Micron is one of the favorite memory chip companies trading at a very low P/E ratio. Market sentiment has been quite weak recently. The stock was oversold and has been testing a major support range.
With things escalating in the Middle East, there are big earnings coming up. Tesla and Alphabet are reporting tomorrow (Wednesday), ServiceNow and IBM are reporting tomorrow, and Intel is reporting on Thursday after the markets close. These reports can act as either positive or negative catalysts depending on whether they exceed market expectations.
There is no break of structure and no break of pattern. The stock continues to run higher purely on momentum. It has become a momentum play where current direction and sentiment are in its favor. The stock is down 30% from the highs of 1300 to the lows around $800 per share. It performs well when momentum is in its favor but quickly gives back gains when momentum is lost.
Proceed with caution at these elevated levels. The stock is up 12%, 13%, or even 14% by the end of the day. Consider what your intention is with the position.
If entering Micron as an investment, the fundamentals make sense. The company trades at a very low P/E ratio with upside potential, generates strong revenue, and has beautiful net income. The fundamentals and growth trajectory support a long-term investment view.
If jumping in now when the stock is up 12% or 13% with the intention to trade rather than invest, proceed with caution because it is a momentum play. Investors do not need to care that the stock is up 12% today because it could be down 6% tomorrow. The investment timeline spans years, not days or weeks.
Ensure positions align with intentions. There is nothing wrong with going long on MU, but understand why it is pushing up today. Do not overcelebrate when it is green and then feel bad if it turns red tomorrow.
Knowing the stock is up significantly on irrelevant news should prepare mentally for a potential correction or downturn. If the stock drops 5% or 6%, assess whether that decline can be tolerated. If not, consider adjusting position size.
President Trump is preparing to announce 10% tariffs on dozens of countries this week as current 10% tariffs expire later this week. Trump advisers have reportedly warned against doing so, worried about risking the economic shock of the original trade war from last year ahead of the midterm elections. The Trump administration is also working on other investigations that could grant legal authority to propose higher tariffs. More tariffs are on the way.
When tariffs are injected into the market, higher prices and more uncertainty typically cause markets to drop, as they have reacted in the past. Markets are incredibly irrational and do whatever they feel they need to do.
Be very careful at extreme overbought and oversold levels. Markets were technically oversold and could deadcat bounce for any reason. Today's movement is a great example. Be careful shorting. Many semiconductor stocks are up 12%. They may not be able to push higher because they gapped up so much in such a short period of time. Proceed with caution, do not use leverage, and do not take positions larger than can be managed. It is great today, but the gains could be given back by the end of the week.
A big week is ahead with Tesla, Alphabet, ServiceNow, IBM, and Intel all reporting earnings. All live sessions are recorded and stored for rewatching. Both sides trades were taken on Micron in today's live trading session.
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