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Former fund manager Richard Breslow summed things up rather succinctly, noting that it would be quite interesting if it wasn’t so insipid.

Yesterday, markets felt really bad, but didn’t necessarily look like it in some of the obvious places. This isn’t risk-off, one news reader scoffingly insisted. Of course he may or may not have been aware that China was on holiday.

Shanghai Composite crashed back below 3,000 to its lowest since June 2016 on huge volume...

As Bloomberg reports, in a stock market where investors are used to being disappointed, Tuesday’s plunge still shocked.

China’s benchmark equity gauge sank almost 5 percent at one point and by the close, the escalating tensions with the U.S. had sent 1,023 stocks down by the daily 10 percent limit -- or more than one in four. Greasing the losses was the Shanghai Composite Index’s slide below 3,000, a level previously breached during market crashes in 2015 and 2016.

SHCOMP lows of the day were perfectly at 19.95% from its highs in January - just avoiding the bear market narrative.

Today, the optics are horrendous, the news leaving little to feel at all chuffed about and yet I’ve spoken with quite a few people who are feverishly looking for reasons to be optimistic.

So Day 1 of the real trade war: S&P -1%, SHCOMP -4%.

This ping-pong ball approach to trading isn’t human nature but it certainly is conditioning, and Breslow asks "should we be blase and look to fade bad news ahead of the expected central-bank reaction or be more systemically concerned?"

Which may be quite prudent, but carries “got you again” risk.

Via Bloomberg,

To that question, I’m wrestling with four questions. And, it may be early, but so far the answers are more mixed than I would have expected. On the other hand, reality isn’t something investors get too hung up on, so you have to keep the flavor of any particular day in mind.

The first thing I revisited is whether risk appetite can decouple between assets. Ordinarily, we tend to think not. This time around, I wouldn’t be so sure. There have been periodic episodes where plain vanilla U.S. assets, even equities, have become safe havens. Liquid and simple has its advantages. They look happy but are masking underlying distress. If this does happen, it can offer great opportunities, but doesn’t last long without help. Use something else to measure mood.

Secondly, ask whether asset prices are in familiar territory or breaking new ground? If it’s the former, reasonable parameters of a trade can be structured. Whether bullish or bearish, there really is no reason to stop trading. For the SPX, 2750 becomes very convenient support or resistance and it is a level that has earned its stripes. Low and behold, as North America rolls in, the futures went right back to it.

For many other assets, like a raft of emerging markets, you’ve got to think big picture. Understanding why they are moving really does matter before you start looking at levels. You can pick the MSCI Emerging Currency Index and reckon last December’s levels, which we touched this morning, look like a fun place to take a shot. But it’s a lot riskier. Turns out fundamentals do matter and a lot of them are dangerously loaded up with dollar liabilities. The DXY made a new YTD high this morning while the Bloomberg Commodity Index continues to get pasted.

Thirdly, it’s also important to keep reminding yourself that the world isn’t just about trade. It’s a biggie to be sure, but issues like migration and Chinese deleveraging, among other things, matter greatly, too. Straw is a useful thing to have unless that last wisp is giving the camel conniptions. Read ECB President Mario Draghi’s comments from Sintra and ask if this is a man who thinks his world is on autopilot. It’s useful to remember that in the past markets took great comfort in forward-guidance updates that assured easy money for as far as the eye could see. I suspect any change of tack from the likes of the Fed would provide a very short-term boost until people realize what it implies.

We are still very much in a position-oriented trading environment.

And the fourth and final question is how all those investors out there feel about what they’ve got on. No one else will feel obligated to grant them any favors.