The Dow is a little confusing, it is so erratic, so lets have a look at Walmart. Walmart gave birth to at least 4 billionaires and it just happens to be the largest civilian employer in the U.S. Also the stock has done well over the past forty years. So three of Trump’s favourite things.

It is also a marvel of EW, adhering to most of the rules religiously. Particularly the 5th wave is clear as a bell. It is a diagonal, read wedge, only rather than terminating into a point it does the opposite and widens out. These structures always occur just before the end, that is the peak. Then they virtually always retrace in their entirety. In this case that calls for a drop to , at least, $47 or so which, coincidentally, happens to be close to a Fibo 62%. So far the stock dropped from $110 to $85, or 22%, in just over two months. Worldwide the company employs 2.3 mln. people, in the U.S 1.5 mln.

No more Chinese imports, no more jobs, no more stock market gains.

ITB is a rather obscure U.S. Home construction iShare or ETF.  The analogy with the Dow is a bit tortured but nevertheless it illustrates the point.

Here we have an initial drop of about 20% into early March followed by a fairly clear a-b-c  corrective counter-trend correction, a wave 2. That may or may not be over and may continue to $42 or so. Then a wave 3 has to start as 5-waves never stand alone!.

The Dow is slightly different but in essence doing the same thing. It could break to the upside beyond yesterday’s high of 24,622 to complete the c leg. With the new trade war with China getting a bit ridiculous this does not seem likely but some modification of this pattern may result.

For those that do not have the benefit of a formal training in economics, I would like to point out that a trade surplus or deficit between an open economy and the rest of the World, of necessity always equals the governments surplus or deficit. This is an inescapable truism. It follows then that a trade deficit is the direct result of a profligate government spending habit. Trump has added immeasurable to this problem. Also, if your currency is THE world currency, it remains to be seen who in the end actually pays. Kudlow, who is not an economist, will have his work cut out for him.

Note; the national accounts formula is:      Y =  C + I + G + ( X – M )

where Y represents national income or GDP, C is consumption, I is investment, G is government spending and X–M stands for net exports. This represents GDP because all the production in an economy (the left hand side of the equation) is used as consumption (C), investment (I), government spending (G), and goods that are exported in excess of imports (NX).

Forget economics, who is going to win this one?

So we were off by 22 points but that is what “about” means. From here on there are a few possibilities, both bull and bear. I show two of them, in pink and green respectively. It is a coin flip from here.