Weekly Market Outlook 5/26/2025
Dollar vs Everyone
Hello Traders,
I hope you all had an excellent long weekend.
Let us recap select trades from last week.
Our swing short from Friday paid nicely on Sunday night.
We were short Nasdaq with out line in sand at 21570 /5980 NQ/ES and that remained untested for entire week.
note: Paid subscribers get detailed idea breakdowns based on algorithmic levels and orderflow tools. Telegram channel and chat access is complimentary with the paid substack subscription.
Standard intra-day long/shorts based on models.
Lotto SPY calls to cap the week.
Moving on,
This weekend’s biggest bombshell was Elon admitting that Congress has no interest in reducing spending meaningfully (surprise, surprise!)
This should be an excellent news for all speculative assets and not so great news for taming inflation and the national debt crisis.
Tariff Update
The global trade environment remains a primary source of market volatility and economic uncertainty, with recent developments in U.S. trade relations with both China and the European Union keeping investors on edge. While a temporary de-escalation in the U.S.-China tariff conflict was achieved effective May 14, 2025, providing a 90-day window of modified tariff structures , the underlying tensions are far from resolved. Tariffs on many Chinese imports remain significantly elevated compared to pre-trade war levels, and the temporary nature of the current agreement means that uncertainty persists. Notably, while the $800 de minimis duty-free exemption for goods from China and Hong Kong, eliminated effective May 2, 2025, remains off the table, the tariff rates applied to low-value postal shipments from China were adjusted downwards as part of the May 14 accord. This complex and evolving tariff landscape continues to impact U.S. farmers, small businesses, and retailers, who grapple with increased costs and financial strain, contributing to potential consumer price inflation.
The tariff saga involving the U.S. and the European Union has been particularly dynamic. President Trump recently issued a threat to impose a substantial 50% tariff on EU goods, with a potential start date of June 1, 2025. This announcement sent ripples of concern through global markets. However, in a subsequent development, this threat was either dropped or postponed following a conversation between President Trump and EU chief Ursula von der Leyen.
Negotiations are now expected to continue, with a new deadline reportedly set for July 9. It is important to remember that the EU already faces U.S. tariffs of 25% on its steel, aluminum, and automobiles, in addition to 10% "reciprocal" tariffs on a wide array of other goods. The pattern of escalating tariff threats followed by negotiated pauses or partial retractions, as seen with both the EU and China, is becoming a characteristic feature of the current trade policy environment. This dynamic creates a highly unpredictable operational landscape for businesses, forcing them to navigate constant uncertainty, but it also appears to be conditioning markets to react sharply to initial threats and then quickly price in relief upon any sign of de-escalation, leading to pronounced whipsaw price action.
Adding another layer of complexity, President Trump has also threatened a 25% tariff on all smartphones manufactured abroad, explicitly mentioning Apple's iPhone, if these products are not made in the United States. Such a levy, if implemented, could lead to a significant increase in consumer prices for these widely used devices.
The broader U.S. tariff framework includes several other notable components. A 10% global baseline tariff under the International Emergency Economic Powers Act (IEEPA), effective since April 5, 2025, generally remains applicable to all imported goods unless specific exemptions or higher rates apply. A 20% IEEPA "Fentanyl-Related" tariff also continues to be in effect. Furthermore, Section 232 tariffs, including a 25% levy on certain auto parts, became effective on May 3, 2025. On a more conciliatory note, a U.S.-UK trade deal was announced on May 8, under which the U.S. is expected to lower tariffs on British steel, aluminum, and automobiles, though specific implementation details are still pending. A proposal from early May for a 100% tariff on all foreign-produced films imported into the U.S. remains, at this stage, a proposal.
The pervasive impact of these tariff measures and threats on market sentiment cannot be overstated. The uncertainty they generate directly influences business investment decisions, disrupts global supply chains, and poses a tangible risk to consumer price stability and inflation outlooks. Indeed, recent S&P Global PMI data indicated that worries about tariffs led to the largest build-up of manufacturing input inventory ever recorded by the survey, as businesses sought to shield themselves from potential supply shortages and price spikes. This inventory accumulation, while a rational short-term response, could lead to a "bullwhip effect" in supply chains. If the feared tariff impacts are delayed, reduced, or if underlying demand falters, these excess inventories could precipitate future order cancellations and production slowdowns, thereby potentially exacerbating any economic weakness.
The overarching philosophy driving these tariff actions, which appears to view them as tools for revenue generation, industrial policy, and geopolitical leverage , suggests that even if specific disputes find temporary resolutions, the broader global trend towards protectionism is likely to endure. This has profound long-term implications for global economic growth, the persistence of inflation, and the operational models and profitability of multinational corporations that have long relied on globalized supply chains and relatively open market access.
WEEKLY LEVELS
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