Market Direction: BULLISH alert issued 10/24/2019
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Market Direction Week Review: 6
weeks ago President Trump said that the US and China had reached an interim
trade deal. Since then the deal has been on-again, off-again numerous times;
this week it has been both. On Tuesday morning, President Trump said he was
willing to wait until after the 2020 elections to reach a trade deal with
China, “In some ways, I like the idea of waiting until after the election for
the China deal, but they want to make a deal now and we will see whether or not
the deal is going to be right,” Trump said. As a reminder, new tariffs on $156B
in consumer goods are currently scheduled to take effect on December 15th,
and this statement created significant uncertainty regarding whether those
tariffs will or won’t be implemented. Equities moved lower on Tuesday following
the news. Then on Wednesday, Trump administration officials and Chinese trade
officials affirmed that the talks are in fact, not stalled, and that a
phase-one deal is still possible before the 12/15 tariffs go into effect.
Equities moved modestly higher on Wednesday and Thursday following the news.
Separately
on the topic of tariffs, this week President Trump also announced that he would
re-impose tariffs on steel (25%) and aluminum (10%) from Brazil and Argentina,
citing both countries’ active currency devaluation as the justification. And this
announcement came the day after he threatened up to 100% tariffs on $2.4B in
wine, cheese, and other imports from France, citing the French digital services
tax on American Internet companies as the rationale. Clearly he is living up
his self-imposed “tariff-man” label.
This
week the Chinese government said it would retaliate if the US enacts sanctions
on China over its repression of Uighur Muslims in the Xinjiang region. As it
did last week, Beijing publicly condemned US interference in China’s internal
affairs saying, “If you undermine China’s interests, you will be hit back”.
China believes the US is trying to create unrest in Hong Kong and Xinjiang.
You’ll recall that last week, President Trump signed into law the "Hong
Kong Bill of Rights on Human Rights and Democracy”; also an act condemned by
the Chinese government.
On
Wednesday, President Trump abruptly canceled a scheduled press conference that
was supposed to happen at the NATO (North Atlantic Treaty Organization)
conference in London. “When today’s meetings are over, I will be heading back
to Washington,” Trump tweeted. The cancelation came shortly after a candid
video surfaced in the press, showing Canadian President Justin Trudeau,
speaking with French President Emmanuel Macron, U.K. Prime Minister Boris
Johnson and Dutch Prime Minister Mark Rutte. In the video, Trudeau appeared to
insult Trump for holding a 53-minute press conference with NATO Secretary Jens
Stoltenberg, while the others laughed at his expense.
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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).
Q3 earnings season is essentially over. With 499 companies (99%) of the S&P 500 reporting, 77% have beaten estimates.
As in recent weeks, the on-again/off-again trade deal with China dominated the news; finally causing some sizeable gyrations in equity markets. The resulting 2% pullback and modest volatility spike introduced a healthy dose of skepticism too, allowing just enough room for the strong November payrolls to ignite the next wave higher.
This week’s volatility might best be described as a wake-up call. Nearly all traders can stomach a 2% pullback and a small volatility spike, thus it should be viewed as a warning against excessive complacency. Now that the strong labor market has driven the market back toward record highs again, perhaps the optimism will be a bit more tempered; at least for a while.
The indicators we follow are in a more bullish direction. But given how many were bearish last week, the outlook for next week balances out to neutral overall. And given slightly higher volatility to start, it is reasonable to expect volatility to be neutral to slightly lower by week’s end. Don’t forget though, regardless of what the data shows, the usual caveat remains until further notice, “Trump’s tweets still trump everything else”.
Economic Calendar: Productivity and Cost (12/10), CPI (12/11), FOMC Rate Decision (12/11), PPI (12/12), Retail Sales (12/13), International Trade (12/13)
Some of the major earnings announcements on deck: TOL, PLAY, LULU, COST, ORCL.
$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
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