Fifty Percent On Canada, And Yields Fell

Trade talks with Canada collapsed over the weekend. Trump's 50% tariffs on about $28 billion of Canadian goods took effect Saturday, and Carney recalled his negotiating team, saying the last-minute US demands amounted to a power play. Canada matches dollar for dollar on September 8, and Ottawa is preparing domestic aid on the assumption nothing resumes before the midterms. SPX closed 7,674 Friday, up 0.4%. Premarket 7,662.

Here is what does not fit. For weeks the selling had nothing to do with demand. Seven consumer and industrial reads in a row came in at or above plan while the index fell, and the entire move was about the cost of money. Now a real demand shock arrives, a tariff war with the largest trading partner, and the bond market rallied on it. The ten-year is 4.71%, Brent slipped 1.4% to about $93 ahead of Bessent's Iran sanctions package, and gold went bid again. A 50% tariff is inflationary. Long yields falling on the day it takes effect says the market is trading Warsh on Friday, not Ottawa. Core PCE and Nvidia both land Wednesday.

We open eight points under the flip at 7,670, inside the negative field rather than above it, with prior resistance sitting on that same number. The call wall at 7,710 is more than three times the next positive strike, but everything above it adds to only half the wall itself, so this one caps rather than pulls. Underneath is the problem. From the flip down to the put wall at 7,630 the negatives run continuous and total close to three times all the positive gamma above it. The 21-day average at 7,654 sits in the first cluster, and prior demand is on the put wall.

So I lean short into the first rally. The flip at 7,670 is eight points away with prior resistance on it, which makes it the natural place to fade while we are still underneath. I want a backtest of 7,654 before I own anything, and even then it is a trade against the profile rather than a position. Reclaiming 7,674 and holding it changes that. Lose 7,650 and the only thing between here and the put wall is the 20-day average at 7,644.