The Trade Talks Demand Caution on the Part of Traders
- US-China trade talks take place over next two days
- Call position sizes are advised
- Small positions sizes may be preferential
The Americans and the Chinese finally sat down on Thursday to start talking about the trade situation that has been at the forefront of traders’ minds for well over a year. Ultimately, this is a major distraction and a disruption just waiting to happen. The situation between the American and Chinese negotiators has been tenuous at best, and as they sit down in Washington DC, you can count on the occasional rumor or tweet throwing the market around.
In fact, this happened just a few hours ago, when Asia started to get to work. As the Australian and New Zealand markets were opened, a tweet came out suggesting that the Chinese delegation was going to leave a day early. This sent the market into a tailspin, which was reversed as soon as officials came out and said there was no truth to the rumor. That being said, this should give you an idea as to how sensitive the market is going to be to the random lie and rumor.
Hope burns eternal
The idea that the Americans and the Chinese are going to come together on terms seems far-fetched. The situation that the trading community doesn’t seem to have a grasp on is that Donald Trump has made it clear he does not want a small deal. The idea of this so-called small deal is simply a “kick the can down the road” type of scenario. Overall, though, the US President is very different from most other politicians on a whole wealth of ideas, which included the fact that he took a massive pay cut for this job. While re-election is certainly something he’d be interested in, it’s not his life’s blood.
Unlike other political situations, this is one of the few things that both the right and the left want to pursue in the United States. As a result, it seems highly unlikely that there is a lot of give on the side of the Americans.
Caution will be crucial
Over the next 48 hours, caution will be crucial regardless of what asset you are trading. The stock markets will more than likely move at the headlines coming out fast and furious over the next couple of days.
No concrete decision is going to be made until late Friday, so the abundance of caution needed over the next 48 hours cannot be stressed enough. If you feel you do need to trade, shrinking your position size is probably the best way to survive the noise that is undoubtedly going to be a main feature.