So, we’re going to war. Trade war, that is. President Trump slapped China with $50 billion in potential tariffs. China responded with $50 billion of their own proposed tariffs (sorry, America’s soybean farmers).
The President’s response was the equivalent of: “Ha-ha-ha! Unleash our tariff death ray!” He rolled out another $100 billion in proposed tariffs on China-made goods.
And now we wait for China’s response.
The market took some bad dives on the initial news. Then it spent two days rallying … before falling out of bed again. Traders are reassuring each other that these are just “proposed” tariffs. There is plenty of time to work out a deal.
I hold that hope, too.
Yet, despite this tariff tempest, there is strength in this market.
Let me show you two ideas.
Idea #1: Gold Miners
It’s about time for a rally in miners, dammit. And in a time when the world’s two biggest economies are going at each other with razor blades, currencies are likely to get shredded.
And what goes up when the U.S. dollar goes down? What, indeed, is sitting on the opposite end of what I call the “Seesaw of Pain” from the greenback?
Gold. And gold miners are leveraged to gold. So, let’s look at this chart I made of the VanEck Vectors Gold Miners ETF (NYSE: GLD). That’s the benchmark fund of big gold mining stocks.
This chart has a “zoom” on the right side so you can see the last couple weeks’ action in close-up. You can see that on Friday, the bears tried an early run and were beaten back.
You can see that the GDX is walking higher along a rising 20-day moving average (MA). That’s short-term bullish. And now, the GDX is up against the falling 50-day MA. Can it break out?
Gold and miners have spent the past couple months building an “energy field” for a potential breakout move. I believe that move is higher.
If China rolls out more tariffs, and the U.S. dollar falls hard as a result, that could act like a lit match for gold and miners. Boom!
That’s idea #1. How about the second course?
Idea #2: Energy Metals are Back, Baby
Everybody needs energy. And tariffs won’t make a lick of difference on the amount consumed.
Lithium is a great way to store energy (in lithium-ion batteries). And the two biggest producers of lithium are Australia and the lithium triangle in South America. Neither of those places is involved in this trade war.
You might say lithium is armored against tariffs.
Lithium stocks were beaten down by some faulty Morgan Stanley analysis warning of a potential surplus. That was foolish. But it’s handing you a buying opportunity as investors take a shine to lithium stocks again.
Let’s look at the leader in the lithium space, Sociedad Química y Minera de Chile (NYSE: SQM).
You can see that SQM has a 20-day moving average that is trending higher. And the stock put in a double bottom before gapping higher. Now, like the gold miners, SQM is testing its 50-day moving average as overhead resistance.
GDX and SQM are two islands of strength in the tariff tempest. As the world’s two superpowers aim their tariff “death rays” at each other’s economies, these two picks should do just fine.
Now, guess what? There’s something that should do even better.
However, I’m saving that for my Wealth Supercycle subscribers. I just sent them a report on this investment this week. It’s on the launch pad. We’re in for a wild ride.
Whatever you do, you should take cover in your own portfolio. Those tariff death rays can be brutal. But don’t forget to look for those opportunities, too. There are plenty of them as well.
All the best,