Is China Fentanyl for the U.S. Stock Market?
DJIA Evening Update 12-5-2018
From ZeroHedge Trade Truce Over? Canada Arrests Huawei CFO At US Request:
Mere hours after Chinese officials finally affirmed President Trump's description of Saturday's trade 'truce' - this after fears that the true nature of the agreement might have been "lost in translation" helped trigger the worst one-day market selloff since October - the DOJ has gone ahead and kicked the hornet's nest, seriously jeopardizing the prospects for a prolonged trade detente between the world's two biggest economies.
And later in the post:
Canada's Globe and Mail reported late on Wednesday that on December 1 - on the same day as the Trump-Xi dinner - Canadian authorities arrested Wanzhou Meng, the CFO of Huawei Technologies and daughter of the telecom giant's founder, Ren Zhengfei. An ex-officer with the People's Liberation Army, Ren is one of the country's most revered business figures.
Meng is being accused of breaking US sanctions against Iran:
Meng is said to be a "rising star" at Shenzhen-based Huawei, the world’s second-largest maker of telecommunications equipment. Reuters reported in 2013 that Ms. Meng served on the board of a Hong Kong-based Skycom Tech that later attempted to sell embargoed Hewitt Packard computer equipment to Iran’s largest mobile-phone operator. At least 13 pages of the Skycom proposal were marked “Huawei confidential” and carried Huawei’s logo. Huawei has said neither it nor Skycom ultimately provided the HP equipment. HP said it prohibits the sale of its products to Iran.
The CFO is now facing extradition to the US on suspicions that she violated US sanctions against Iran (allegations that nearly resulted in a devastating Treasury "death sentence" earlier this year for Huawei rival ZTE).
And the reaction to the news has been like Fentanyl for the US stock market:
Dow futures were down over 500 points as they opened... (NOTE that Dow futures pushed up during the day to test the 200DMA)
It appears that continuing trade and other tensions between are proving rather deadly to any attempts by the US stock market to rally. As this is being written the Dow Futures are now down over 300 points. Futures Fair Value is indicating that the market will open a little less than 200 points down.
Even if the DJIA opens down 300 points tomorrow (which we don't yet know if that will happen) it would still remain at the lower end of the 8th (out of 9) levels. The 8th level runs from 24,576 to 26,624. A close below 24,576 would drop the Dow down into the 7th level which runs from 22,528 to 24,576.
The 24,000 level for the DJIA has provided psychological support, so the market still has some ground to cover before truly testing whether or not the current decline is short-lived or longer lasting.