Wake up and be alert.

Right now, investors are standing on the tracks watching the speeding train come at them ... but are refusing to move. That's a dangerous game of cat and mouse as Donald Trump bends the will of market bulls with his renewed tariff push on China. As businesses begin to take Trump more seriously on tariffs and worry about a global trade war, their concern is likely to be articulated during second-quarter earnings season with more cautious guidance than many on Wall Street believe. By the time that reality hits the newswires, the market may have already adjusted by a fair 10%.

Fair is a valid word here for two reasons. One, profit estimates remain quite elevated and reflect little in the way of rising costs of doing business in more challenging trade conditions. Two, investors are probably underestimating how selling could lead to more selling of hot areas of the market (see FANG stocks, for example). Consider the rotation that's possible based on the current positioning of bullish investors.

Prior to the dot-com run, defensive sectors of the market (staples, utilities, etc.) comprised more than 28% of the overall stock market (using the S&P 500 I:GSPC ), according to long-time market bull Jim Paulsen of The Leuthold Group. Today, that stands at about 11%. During the last two years of the bull run, the level of defensiveness has fallen from a 2016 summer high of near 18%. 

What You Need to Be Watching

With the market catching a case of the Debbie Downers amid trade war fears, TheStreet's founder Jim Cramer has developed the GLUM Index (joining other acronyms he has created, FANG -- Facebook (FB) - Get Report , Apple (AAPL) - Get Report , Netflix (NFLX) - Get Report and Alphabet (GOOGL) - Get Report -- and Cloud Kings). "We need a gloom index. Just an amalgam of names that encompass the gloom and can be bought every time we feel gloomy, which, sadly, is pretty much every day," Cramer wrote on TheStreet's sister publication Real Money.

You can read the full piece on the GLUM Index here.

Twelve stocks comprise the index, with the top names including Boeing (BA) - Get Report , Caterpillar (CAT) - Get Report and General Electric (GE) - Get Report . Take note that they tend to be large-cap multinational companies that could lose the most in a heated U.S. trade war with China (or at least the market thinks they could lose). Hence, the names are under pressure at the moment. When the index begins to turn its frown upside down, the broader market could stage an oversold rally.

Stats on TheStreet

(1) About 14% of U.S. adults were smokers in 2017, down from 16% in 2016, according to new government data. USA Today is quick to mention that in the 1960s, roughly 42% of people in the U.S. smoked. The tobacco stocks certainly reflect this downtrend: Altria (MO) - Get Report and Phillip Morris (PM) - Get Report shares are down 27% and 35%, respectively, over the past year.

(2) In the weird category, Facebook (FB) - Get Report shares will open Tuesday around an all-time high. Maybe the higher costs for Facebook to monitor its social media empire won't dent profits as much as first thought.

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