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Trade War Tirade Sinks Stocks: Can the Rally Survive?

Trade war jitters are pushing stocks lower this morning.

Futures are deep in the red today thanks in part to trade war fears, the financial media tell us. Meanwhile, crude extends its retreat. Oil is down nearly 1% this morning, pushing toward new two-month lows.

Can red-hot tech stocks save the rally — or will a deluge of dirty politics and negative news slam stocks this week?

Let’s find out…

Here’s your exclusive trade prep for the week of June 18th:

TACTIC

A nervous kid working for FedEx rang my doorbell Saturday afternoon. He mumbled something about how I needed to sign for a package.

But I didn’t remember ordering anything.

A quick inspection of the box revealed the young driver was not only at the wrong house — he was two streets north of the package’s intended destination.

“Wrong address,” I said. “You’re two streets off.”

I pointed the exasperated delivery guy in the right direction and he raced off. It was getting late and he clearly had more than a few boxes to unload before calling it a day.

It’s not the first time this has happened. And I know why…

The Amazon Effect is swamping big delivery companies. That’s probably why I’m seeing young drivers racing to leave packages on my porch long after the sun has gone down. There’s an endless supply of Prime orders waiting to go out every single day.

So it should come as no surprise that FedEx Corp. (NYSE:FDX) has rallied 15% off its March lows. The stock, which is quietly tracking toward its all-time highs, has occupied a spot in our trading portfolio since it began to pick up momentum back in April.

We’re starting to see additional bullish setups throughout the transportation sector as well. The entire sector is firming up, even as market forces push against these stocks.

TRADE

If we followed old-fashioned common sense, we would probably steer clear of transportation stocks this summer.

After all, high energy prices and trade war developments could each act as negative catalysts for the sector.

But when transports nearly broke down twice this year at critical support levels, I showed you how buyers were beginning to step in. It was our first clue that big gains were brewing in the sector…

It’s a bullish sign to see these lagging transportation stocks make up for lost ground once again. This catch-up move opened the door for our FDX trade in April. The Dow Jones Transportation Average tested its February lows and subsequently posted an impressive week of gains to vault the stock back above its 50-day moving average back in April. The breakout move set up the sector for the gains we’ve witnessed over the past two months.

transports

With new all-time highs in sight, I’m on the lookout for another strong trade in the sector. Airline stocks have my full attention heading into the new trading week. This group has lagged its fellow transports, pushing toward new 2018 lows this month.

But if these stocks can rally off support, a snapback move could produce quick double-digit gains. Pay attention to the airlines — these stocks could trigger a new trade before the end of the week.

TAKEWAY

I like to say that a healthy bull market is like a relay race.

When market leading industries and sectors become overextended, traders will pass the baton to the next hot group of stocks. That’s what’s starting to happen right now as stocks regain their footing.

Tech stocks have remained one of the clear winners as the market has recovered from its first quarter correction. But some of the market’s forgotten groups are finally getting some much-needed attention.

If tech stocks begin to cool off this week, we’ll need to pay close attention to where the next hot trade develops.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

View More By Greg Guenthner