Tariff Drums and Thin Tape: Markets Await a Catalyst

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Our View

The ES and NQ are in rest/back-and-fill mode. The week after the 4th of July (from what I remember) is slow, and both Monday’s and Tuesday’s trade was just that.

I used to like to trade the narrow chop, but the 4 to 6-point intraday moves are too hard to trade. I think there are a lot of reasons for this, but the main one is how far the markets have rallied in such a short period of time and tariff uncertainty, which doesn’t seem to be moving the markets around like they were.

The other part of this is that we are heading into the middle of summer, and it seems like there is a lot more interest in taking time off than getting spun around trading the ES and NQ.

The ES’s trading range was 6254 up to 6289, a 35-point range, with most of the late-day trade in a 6 to 8-point range. It settled at 6270.50, down 0.08%.

Part of the weakness came from Trump’s comments about the U.S. not offering extensions to the August 1 deadline for reciprocal tariffs to take effect and announcing 50% tariffs on copper. Commerce Secretary Howard Lutnick said that some 15 to 20 world leaders would soon get letters warning them what potential tariffs they could face if they failed to reach trade deals with the U.S. South Korea and Japan have already received the warning letter, and last but not least, BRICs nations will pay an additional 10% tariff charge.

What the ES needs is some further back and fill, even if it comes from lower levels. The shorts have been wiped out, and by all rights, we could and should see a larger pullback. But with the volume so low, it’s hard to stay short.

Another thing is the lack of economic reports and Fed speak. Wholesale inventories is the lone 10:00 economic report, and the May Fed minutes are at 2:00.

In the end, it was another low-volume, narrow-range trade. In terms of the ES’s overall tone, I can’t say the ES’s -0.08% decline changed things much. If there was anything that sticks out, it’s the yield on the 10-year note traded up to a two-week high at 4.42%, definitely something to keep an eye on.

In terms of the ES’s overall trade, volume was low at 1.031 million contracts traded.