Market Direction: BULLISH alert issued 9/5/2019
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Market Direction Week Review: Stocks
declined last week, with U.S. politics dominating the news headlines. House
Democrats announced the initiation of an impeachment inquiry into President
Trump. An impeachment would require a supermajority vote in the Senate where
Republicans maintain control, making the chances of an actual conviction less
likely. While this development adds to the political risks already prevalent in
the markets, we think that stocks will ultimately reflect what is going on in
the economy and not Washington.
Treasury
Secretary Steven Mnuchin finally confirmed that trade talks between the U.S.
and China will occur in Washington DC on October 10th and 11th.
He also reiterated previous statements that President Trump wants a trade deal
with China, but only if it is the right deal; otherwise the tariffs will remain
in place. President Trump stated that a trade agreement might occur sooner than
many expect.
Separately,
previous negotiations regarding a trade deal where Japan would purchase U.S.
agricultural products, were temporarily derailed this week when Japanese trade
officials asked President Trump to provide assurances that he will not impose
national security tariffs on Japanese built automobiles; actions he has
previously threatened. President Trump withdrew that threat and a new limited
trade agreement was signed; seen as a temporary measure that will be replaced
by a more comprehensive agreement at a later time.
On
Tuesday (9/24) Chinese trade officials announced that waivers had been granted
to several Chinese companies allowing them to buy a total of 2 to 3 million
tons of U.S. soybeans tariff free. These waivers were the direct result of meetings
between low-level trade officials on both sides, last week, and are intended to
ease tensions ahead of the top-level negotiations being scheduled in Washington
DC, in October. As that date approaches, Chinese negotiators are saying that
they are willing to buy more U.S. products, and that the next round of trade
talks would result in a better outcome if both sides would "take more
enthusiastic measures" to show goodwill and reduce "pessimistic
language".
Separately,
on Tuesday (9/24) Hong Kong Chief Executive, Carrie Lam said that 20,000 people
have registered to attend a town hall-style meeting in a venue sized for only
150 participants. The meeting follows 16-weeks of protests and rioting. Ms. Lam
has committed to listening to the citizens’ opinions, but also called for the
event to be held in a “peaceful, rational and calm environment”.
This
week in Brexit news, Britain’s Supreme Court ruled that U.K. Prime Minister,
Boris Johnson’s Parliamentary shutdown was illegal. While the court did not
find that he provided false information to the Queen, it did find that
he gave unsatisfactory information. Following the ruling, it is now
Parliament’s duty to determine the next steps in the Brexit process. And while
the future remains quite uncertain, Mr. Johnson’s commitment to the 10/31
deadline seems rather unlikely.
How
the market finished last week, the S&P 500 down 1.0%, the Nasdaq down 2.2%,
and the Dow down 0.4%.
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Market Direction This Week: We track the stock market based on our Bullish and Bearish Alerts a new Bullish Alert recently started on 9/5/19 and we suggested to our followers they can trade any new long positions based on are model. We will continue to provide you the current stock market conditions as they develop. The current stock market environment is in an uptrend (see Market Direction Mid Week Update: Trading Strategies).
The economic calendar is heavy next week, including the reports on the September employment situation. And while the impeachment inquiry is certain to garner plenty of media attention, traders will likely continue to focus on trade negotiations with China. Heavy hedging activity indicates that some participants are preparing for the worst.
China will be coming to Washington in a couple of weeks for more trade talks, even as new tariffs are scheduled to take effect just 4 days later. While some investors will no doubt be watching next Tuesday’s ISM and PMI reports on the Manufacturing sector, most of the economic attention will be aimed at Friday’s group of reports on the September employment situation. I expect the strong employment trends to continue.
Two weeks ago a warning of negative seasonal factors and stated that, “…with the SPX +5.7% in the past 3 weeks, sentiment seems extremely stretched to the upside”. The SPX is -1.2% since that time.
There were more downgrades than upgrades in the indicators we follow this week. Additionally, since volatility is creeping higher due to trade uncertainty and the impeachment hearings, a secondary outlook of volatile is justified. However, regardless of what the data shows, this caveat shall remain until further notice, “Trump’s tweets still trump everything else”.
Economic Calendar: Chicago PMI (9/30), ISM Mfg Index (10/1), Factory Orders (10/3), ISM Svcs Index (10/3), Employment Report (10/4)
Some of the major earnings announcements on deck: PEP, MKC, LEN, STZ, COST.
$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Building a community of investors one trade at a time. Share with a friend. Cha-ching!
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