Rally Runs Out Of Steam As Semis Socked, Resistance Reached

Trade war or no trade war?

That is the only question algos have to answer daily, and today they decided to pick the latter, as the S&P 500 rose for a third day after even more damage control emerged from Trump's top two trade and econ advisors.

First, Trump's trade chief Peter Navarro said on CNBC said there’s still time to hash out a deal with Beijing while Larry Kudlow repeated that the US will get a trade deal with China "over a period of time" as the latest measures are "just proposals right now."

And even though in early trading it appeared that the Dow Jones would have another 700 points ascent having continued yesterday's trajectory, just around noon, the DJIA hit a key resistance line, which capped out today's gains to just over 300 points.


The Nasdaq found a similar resistance at the 100DMA level.

The most shorted stocks, which ripped higher in early trading, rolled over shortly around lunch.


And not even the continued pressure on the VIX - which tried to break below 19 but failed - helped bulls overcome the hump.

It wasn't just technicals, however, as the Philly Semiconductor Index was socked early on and slid all day starting at the open...

... as a result of a bearish note by the UBS analyst covering the sector, who initiated Micron at a "Sell" with a $35 price target. While normally markets don't care about sellside research, this time the memory chipmaker - which has seen many hedge funds load up its stock in recent months - tumbled as much as 4%, dragging the entire semi space lower.

At the same time, that other tech darling, Nvidia, sank after a Citron tweet reiterated its bearish case on the company, and said Citron was pressing its short and that even without needing "to write pages", the short interest is half of where it was a year ago, suggesting most of the shorts had covered:

Citron pressing $NVDA short expect sub $200 soon.  Mkt starting to realize that ML/DL is narrowing and hyper-scale core customers experimenting with diff prop hardware solutions, Ether spreads are dead, Auto- unknown. No need to write pages. Price action.Short Int 1/2 of a yr ago

The result was instant:

Meanwhile, after several days of downside, European equities finally caught up to the American rebound, with the Stoxx 600 surging the most since June 2016 as every sector rallied.

Elsewhere, the dollar rose all day with the BBDXY rising to 1130, while the 10-year Treasury yield popped to just shy of 2.84%, and is now up 10bps in the past 3 days.

Finally, there was Tesla which nobody can explain why it is soared $50, or 20%, in 2 days.

And with all bets now off, we look forward to the next biggest macro catalyst, tomorrow's payrolls report, where if wage inflation comes in hotter than expected, prepare for another very volatile day.