Trade optimism soon?
Updated
We mentioned in our previous post that we'd be riding the greed train long as long as the SPY continued to close above its 9 DMA. Yesterday it finally closed below it and with substantial volume. Looks like a retest of the megaphone pattern is in the near future.
A fade to around 306 and then I would guess we get a nice trade optimism tweet saying how great things are going, and a deal is likely to get done. There is 9 trading days (including today) until that deadline on tarriffs Trump said WILL go into affect if a deal is not agreed upon.
Outlined a few possible scenarios based on the Dec 15 deadline. It would make the most sense to see either the yellow/white line to play out here being a bounce expected at the megaphone support and the WH ability to pump markets with trade optimism. That pump can only last so long in my opinion if Dec 15th is a hard deadline, because we all know there is no deal getting done.
Can't rule out some back pedaling though and a further trade truce extension which could boost the market to new highs. (Green)
The "bounce" at the trendline will be key here. Look back at both 2018 falls for reference of a dead cat bounce vs a legit one.
A fade to around 306 and then I would guess we get a nice trade optimism tweet saying how great things are going, and a deal is likely to get done. There is 9 trading days (including today) until that deadline on tarriffs Trump said WILL go into affect if a deal is not agreed upon.
Outlined a few possible scenarios based on the Dec 15 deadline. It would make the most sense to see either the yellow/white line to play out here being a bounce expected at the megaphone support and the WH ability to pump markets with trade optimism. That pump can only last so long in my opinion if Dec 15th is a hard deadline, because we all know there is no deal getting done.
Can't rule out some back pedaling though and a further trade truce extension which could boost the market to new highs. (Green)
The "bounce" at the trendline will be key here. Look back at both 2018 falls for reference of a dead cat bounce vs a legit one.
Note
Everything is looking strong right now. Unemployment is the one thing that has not suggested a recession is imminent. Another big beat last Friday.
5 more trading days left until this trade "deal" none the less. Still would be shocked if there isn't some sort of sell-off next Monday, but how much? More importantly, how much can the WH pump trade optimism into the markets over the next 5 days?
Note
Then again......we could have a false break....
Still holding the 9 dma. Could possibly see one last test of the upper channel / new highs over the next couple days.
Price action looks weak after the last two days though, and logically a further sell-off should be occurring, but we live in a fed-induced tarrif headline driven market.
Typically fed days are slow "wait and see" type trading days in the mornings. Potentially a sell down to the 9 day, everything goes right with the Fed, and back up we go.
What happens if that doesn't happen? What if a sell-off occurs? Say 2-3%+ over the next three days? Does that force Trump into a quick Tarriff deadline extension causing markets to rally? Can't rule it out...
To me, the best bear case right now is Trump actually putting these Dec. 15 tariffs into affect. The one "recession indicator" really holding up markets right now is the unemployment rate. Everything else seems to be near dot.com bubble or financial crisis levels. Raising tariffs will help change that....
Note
Just a friendly reminder that there is still no trade deal. This "deal" made yesterday was a one sided agreement. One Trump and his administration agreed on. China has yet to say they agree to these terms, and it has been stated numerous times that they don't want to have to buy a surplus of ag products as being part of the deal....None the less....
We are seeing a break, and successful retest of this shorter term channel that has formulated over the past several months...Everything is set up to soar if a deal is signed by both sides.
But hey fake outs happen, and anytime there is bad news on the trade front, it seems to happen ever so conveniently after futures close for the weekend...
Note
Also to note, the US wants China to pay DOUBLE what it did in AG products in 2017 in 2020 as part of this signed Trump deal. That being $50 billion. In exchange it will cut tariffs on goods by 50%, now bear in mind ALL of this is just words and hypothetical until pen is put to paper.
mobile.reuters.com/article/amp/idUSKBN1YG0KD
According to the WSJ, June 2018-June 2019 the US collected 63 billion in tariffs. In June 2019 they collect $6 billion...so based on the most recent monthly average, it would come out to $72 billion a year. The U.S. is proposing to what we think, slash that number in half = $36.
wsj.com/articles/u-s-collects-63-billion-in-chinese-tariffs-through-june-11565168400
So China will "save" $36 billion in tariffs, but have to pay at least an extra $25 billion in agriculture products. In the Chinese eyes, that's $25 billion in tariffs being added on because they're are being forced to buy something they do not need, so what's the difference? How is that a deal China would want?
Personally, I think it's a pure political play by Trump. He puts an offer on the table. If they decline, he can say: "I tried and China doesn't want to play ball". If they do accept, he says "I made a great deal, the farmers are happy, vote for me to be president!".
Funny how a month in a half ago, China was willing to ramp up purchases to $20 billion in a faze one deal:
markets.businessinsider.com/news/stocks/china-to-buy-20-billion-us-farm-goods-trade-deal-2019-10-1028628186
Note
Looking like a good day to trim some longs. Markets at all time highs. Worst that can happen is you miss a Monday pre-market pop if a deal somehow does get done.Note
We were wrong. Kinda. I don't know if you really call that a "deal". Was more restating the same rumors we've heard for the last 6 months but....None the less.Meant to post this, this morning:
Rising wedge formed over the last month-ish broke, and the bottom side has seen a couple of attempts to regain support. If that fails...next support is the lighter yellow trendline that has flourished in December. If that breaks....some gaps down to 309 will likely be filled.
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