Prominent New York Stock Exchange floor trader Peter Tuchman, who is renowned for his striking facial expressions, refers to the conflicting messages coming from the White House as “economic terrorism.”
Things were going well early in the year, and on February 19, the S&P 500 SPX reached a record intraday high of 6,147. When President Donald Trump started discussing imposing tariffs on Canada and Mexico, things took a turn for the worst. Following weeks of turbulence, the index fell almost 19% from its high to its lowest point.
Tuchman saw the market’s confidence diminish over the course of six weeks as equities fell as a result of what he described as “a complete function of terrible messaging” from the White House.
In order to highlight the significant losses experienced by the typical household, he stated that people’s 401(k)s now resemble 101(k)s.
Tuchman pointed out that after creating all that turmoil, the White House changed its mind and decided that Jerome Powell could continue to serve as chairman of the Federal Reserve and that the tariffs would be less harsh than first anticipated. Trump moderated his stance on China on Tuesday, stating that tariffs on the nation would not reach 145%.
Major indices surged as a result of the change, with the Dow Jones Industrial Average DJIA jumping 2%, the Nasdaq Composite COMP rising 4.7%, and the S&P 500 soaring 3.2% since Tuesday’s closing.
Tuchman, who was interviewed by MarketWatch on Wednesday, said he would have noted that the U.S. economy and stock market were two weeks away from collapsing if the discussion had been on Monday.
Fortunately, markets have recovered from their lows, and he thinks things should be well going forward provided Washington continues to adopt a more accommodative stance. But, he warned, the chances of it occurring are only 50/50.
How to participate in this market
The only thing long-term investors can do at the moment, according to Tuchman, is to stand their ground. They might think about progressively increasing their holdings at reduced costs if they have extra cash on hand, which would lower their cost averages. They shouldn’t spend much time looking at their portfolios in the meanwhile.
“This is a great market if you’re a short-term trader,” he said.
“We’ve been done trading every day at 11:30 a.m. because the technicals are working beautifully,” Tuchman stated. “It has been helpful to be able to build up lovely technical-analysis trades when you have a market that fluctuates so drastically. The drawback is that even if you are in a trade for all the right reasons—the technicals and support are there—you could blow up your account when the White House tweets. That’s our current situation.
Tuchman advises reducing the size of each trade’s position and taking faster profits by establishing tighter stop-loss levels in order to mitigate that risk.
Regarding chart indications, he shared some of the rules he follows to monitor direction, but he also pointed out that each trade is slightly different and that the elements that will confirm it change.
As a gauge of the general direction of the market, the advance-decline line counts the number of stocks that are up or down for the day.
Another is the relative strength index, an oscillator that appears on a chart beneath the price of a security. By fluctuating between 0 and 100, it determines the underlying momentum of price movements; levels of 70 or above indicate overbought conditions, while levels of 30 or less indicate oversold conditions.
When the market is erratic, Tuchman likes to use a broader range of 80 to 20 to allow for more maneuvers.
He draws support and resistance lines, which indicate points from which prices have historically recovered or fallen.
In order to eliminate noise from volatility, Tuchman also tracks exponential moving averages as opposed to basic ones. In contrast to the SMA, which assigns equal weight to all price movements, the EMA lends greater weight to recent prices, indicating the general direction in which the price is trending.
This makes it easier to spot a trend change early on, which is particularly useful in a market that moves quickly. He examines the 30-, 65-, 15-, 200-, and nine-day EMAs.
