Monday Takeaways: China Deal Delivers Historic Tariff Rollback

Shah Gilani|May 12, 2025

The China deal just changed everything for your money…

This morning’s pre-market explosion wasn’t random. Switzerland delivered a miracle: China’s crushing 145% tariffs just collapsed to 30%, while U.S. importers face only 10%.

The numbers don’t lie:

• SPX futures eyeing 5,800+ (well above 200-day moving average)
• VIX crashed from 52.3 to below 20 – the magic number for sustained rallies
• Walmart earnings Thursday will test if this rally has real fundamentals

This is what de-escalation looks like when it actually works.

But here’s the critical question: Can markets hold above the 200-day and consolidate, or is this just another head-fake before the next drop?

Click on the image below to find out why this breakout could be different.

Transcript

Hey, everybody. Shah Gilani here with your Monday Takeaways.

It is premarket just a little bit after 8:30 a.m. when I’m recording this.

Happy Monday to all of you because it’s a happy day for the markets.

The first takeaway is what just happened this morning, pre-market open. We understand that the talks in Switzerland went well between China and the United States — a 90-day pause on the heavy tariffs that were 145 percent on Chinese goods that the president at the end of last week said, “Maybe it looks like 90… excuse me, 80 sounds about right.” Well, now they’re down to 30 percent, and the Chinese have agreed to limit tariffs on U.S. imports into China to 10 percent. So we’ve got 30 and 10. That’s a big comedown. That’s a de-escalation, and that’s the big news this morning. Takeaway is obvious.

Futures are ripping higher. So looks like a pretty good day for the market. And it looks like a pretty good, I would say, setup for the markets — all of them. So have a quick look here at what I’m looking at in terms of the S&P. Yes. Here’s the nice run-up higher. Here’s the mess going down and terrible breakdown through this channel and just ugliness.

And then we came up. We break, we come up. We get up above this downtrending channel and boom, we take off now. This is our base case higher. That’s pretty steep.

The futures this morning are looking like they’re going to open up as far as SPX north of 5,800. By the way, that’s way up here, well above the 200-day. So FYI, 200-day moving average here.

Again, pretty easy for stocks to break out of the 200-day at 5,748. Right here. This red line is the 200-day moving average. The blue line here at 5,551 is the downtrending 50-day. And you can see the 200 flat line maybe looking like it was going to head south. Now we’re about to open up on SPX north of 5,800, north of the 200-day moving average, which should bring in sidelined money. So takeaway there is, it’s a bullish setup, because all the tariff uncertainty, notwithstanding, it isn’t over, but there’s a little bit more, I would say, foresight possible now that things can get done.

We had a deal with the U.K. last week, markets like that. Even though they ended the week pretty flat, the setup was there. And you can see the setup here. So for those of you who bought the dip as we did — I had my subscribers buy a ton of stocks down here on the dip.

Yes. We caught pretty close to the bottom, and we have been buying and adding on the way up because once we broke out here, we even added more. So this is what you should be doing. This is why you should be following me.

Just saying.

Markets look like they want to go up. So we’ve got a busy week.

Not that last week doesn’t matter. It does. But the fact that it was flat doesn’t mean the markets are in some kind of never-never land. They are looking like they want to consolidate, and today, they certainly look like they want to go higher.

So we can still consolidate all the way around here. If we get up to about 5,800, we still come down and trail around here and we work sideways here. That’s still a positive move for the markets. I think that’s a bullish move if they consolidate here up to this very steep run on the heels of the very steep downdraft.

So markets to me look like they want to go up. Now we got a busy week. We have CPI tomorrow. The expectation for core is up 0.3 percent.

We’ve got retail sales on Thursday. And I think it’s even perhaps more important than retail sales. In particular, we’ve got Walmart earnings on Thursday. And I think that’s going to be a big deal.

We’re going to see what Walmart has done, what they’re saying about their margins, what they’re saying about — are they going to raise prices? Are they going to pass this along to consumers? Are they going to eat it? Are the margins going to get hurt?

How is the market going to react to Walmart’s earnings and their guidance?

Just as if nothing had happened, the guidance is still going to be messy because even though we have a 90-day pause with our dustup and the tariff wars with China, we don’t really know ultimately where that’s going to come out and neither does Walmart. So it’s going to be interesting to see the earnings. That’s going to be a lot to take away from that. But so far, we’ve got de-escalation.

Markets love it. Everything across the board looks to be up. Again, it’s going to be an interesting week. I think Powell speaks this week also.

And just one thing I’m going to take away that makes me bullish is the VIX is down from 52.3 on April 8. It closed Friday at 21.9.

That’s a heck of a comedown. This morning, given the premarket, the VIX is trading around 19.97. That’s down almost 9 percent from Friday’s close.

The VIX average, the mean of the VIX since 1990 is 19.5. We are getting down to that point where the VIX teeters at 19.5. Below that, very bullish. The lower it goes, the more money comes off the sidelines, especially for risk parity funds who, when risk in equities subsides, plow money into it. So they’ve been on the sidelines waiting for volatility in the equities markets to come down. It has come down and probably a good time for them to start applying more capital into equities and perhaps even out of bonds because the bond market looks like it’s still going to continue to be somewhat volatile.

Yields are a little bit higher today. So keep an eye on the VIX. Takeaway there is a VIX below 19.5, and trending lower is a very bullish sign. You definitely want to be on top of that.

But looking at this S&P chart, you also want to be on top of these numbers because, again, once we get above the 200-day and if we can stay above that and consolidate even above that — if we don’t come down and we stay above the 200 and consolidate, we’re going to be making new highs long before the end of the year. So markets look pretty good to me. Stocks just look like they want to go up. Those are your takeaways for Monday.

Have a great week, everybody.