^DJI Today: January 23 TACO Trade Rebounds as Trump Backs Off EU Tariffs
The TACO trade is back in focus after Trump signaled he is backing away from new EU tariffs tied to a Greenland framework. Dow Jones today climbed about 999 points, up 2.06% to 49,488, with risk appetite improving into the US session. Hong Kong investors should treat this as a tactical reset, not a green light. Policy headlines can still swing markets. We outline what this means for sector leadership, index levels, and trading setups relevant to HK portfolios on January 23.
Why this rebound matters for HK portfolios
Signals that Trump may pause new EU levies, alongside a Greenland framework, reduced immediate tariff tail risk. That helped revive the TACO trade and boosted global cyclicals. Analysts still flag shifting politics and legal checks that could change the path. See context and scenarios in Bloomberg and Business Insider.
Momentum improved, but gauges are warm. RSI is 65.04, CCI 136.81, and Williams %R at -5.30, all near overbought. The Dow traded near its upper Bollinger Band at 49,496, with ATR at 482 points, implying brisk intraday ranges. Options prices eased on the headlines, yet whipsaw risk stays elevated if talks stall or guidance shifts again.
Sector and style rotation in play
A softer tariff stance typically helps exporters, machinery, autos, semis gear, and banks. Defensives like utilities and staples may lag when growth hopes rise. For HK investors, the setup favors China-facing shippers, supply chain tech, and selected financials tied to USD flows. Keep positions flexible, as trade rhetoric can flip and pull capital back into safety quickly.
If risk stays firm, long-duration growth can ride lower perceived policy risk and stable yields. That said, Treasuries look vulnerable to reversal if data surprise hot. With HKD pegged to USD, local rates shadow the US. That leaves HK property and utilities sensitive to any rise in yields after the first relief bounce.
Trading plan for the next 1–2 sessions
The Dow’s day high hit 49,579.9, near the year high at 49,633.35. Price hugged the upper band, a spot where breakouts or rejection often occur. ADX at 21 hints at a modest trend. Consider trimming into strength near highs and adding on confirmed pullbacks. Headline windows matter, including US afternoon updates and Europe-related press.
Keep position sizes moderate and use stop levels wider than the 482-point ATR to avoid noise. HK investors can hedge beta with HSI futures, or reduce USD sensitivity via staggered entries. Simple call spreads can express upside in a measured way. Avoid over-exposure ahead of court decisions or policy remarks that could alter tariff leeway.
What could go wrong next
Talks can stall, or legal rulings could curb executive room on trade. NATO or Davos-adjacent remarks might shift tone. If Trump renews tariff pressure, the TACO trade could unwind quickly, pressuring cyclicals and exporters. Keep a live watch on official statements and verified reporting such as Bloomberg for fast changes.
Overbought readings raise the odds of a fade. With RSI near 65 and the index tight to its upper band, a normal pullback can arrive without fresh news. ATR near 482 points means swings can be sharp. Plan entries, define exits, and avoid chasing into resistance unless momentum broadens across sectors.
Final Thoughts
The tariff step-back revived the TACO trade and pushed risk higher, with the Dow near record territory and momentum firm but warm. For Hong Kong investors, treat this as a tactical window, not a trend guarantee. Focus on cyclicals and exporters while keeping hedges in place. Use the Dow’s band edges and recent highs as decision points, scale entries, and keep stops outside average ranges. Watch court outcomes, EU signals, and US remarks that could quickly change tariff odds. If headlines stay constructive, rotation can continue. If tone worsens, defensives, cash, and tighter risk budgets should take priority.
FAQs
What is the TACO trade and why is it moving today?
The TACO trade refers to positioning that expects tariff threats to fade after tough talk, helping cyclical stocks and exporters. Today’s bounce followed signals that Trump may pause new EU tariffs tied to a Greenland framework. That trimmed near-term tariff risk and lifted sentiment, although policy and legal twists could still change the outlook quickly.
How did the Dow Jones react to the tariff headlines?
Dow Jones today rose about 999 points, up 2.06% to 49,488, trading near its upper Bollinger Band. Momentum is firm, with RSI near 65. This helps cyclicals and banks, while defensives may lag. Levels near 49,580 to 49,633 are key for potential breakout or rejection over the next sessions.
What should HK investors focus on in the next two sessions?
Prioritize risk control and clear levels. Trim into strength near resistance, add on confirmed pullbacks, and keep position sizes moderate. Consider HSI futures for hedging and simple call spreads for upside. Watch court rulings and EU statements that could alter tariff leeway, since a quick tone change can reverse the TACO setup.
Which sectors tend to benefit when tariff risks ease?
Exporters, machinery, autos, semis gear, and cyclical financials usually gain when trade tensions cool. If yields stay stable, select growth can also work. Defensives like utilities and staples may lag on risk-on days. Rotation can flip fast, so monitor leadership and breadth rather than committing to one style too early.
What technical indicators are signaling caution now?
RSI at 65.04, CCI at 136.81, and Williams %R at -5.30 show near overbought conditions. The index is close to its upper Bollinger Band, and ATR near 482 points implies large swings. These signals support a plan with staggered entries, defined stops, and a readiness to hedge if momentum stalls.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
