The Bulls are Celebrating

This morning the bulls are celebrating as the G20 meeting produced an agreement to kick the 25% tariff increase 90 days down the road as the US and China try to work out a trade agreement.  As a result of this extension Asian and European markets reacted with sharp gains and the US Futures are pointing to a 400 point gap up.  It’s great to see such a big bullish reaction this morning, but let’s keep in mind that until we get a completed agreement, we can expect this wild market ride to continue!

As you plan your week keep in mind, the market will close on Wednesday to honor the life of George H. Bush.  Also, keep in mind that, the Federal Government will shut down Friday night unless Congress reaches a budget agreement.  If that not enough pressure the president is planning to end the NAFTA in an attempt to force the Congress to pass the new trade agreement.  What could go wrong!  I think it would be wise to prepare for very high volatility, big gaps, and possible overnight reversals in the days and week ahead.

On the Calendar

On the Earnings Calendar, we have 31 companies expected to report today.  Make sure your checking against current holdings and before entering new positions as part of your daily preparation.

Action Plan

About all, we can do this morning is hang on tightly and prepare for volatility with the futures indicating a huge gap up the open.  The US and China have agreed to hold the more than 200 billion in tariffs at 10% for another 90 days.  If they are unable to complete the agreement within the additional 90 days, the tariffs will ratchet up to 25%.  I guess the good news here is that the countries are talking, but I must admit I have trouble understanding how kicking the decision down the road for 90 days equates to 400 points Dow rally this morning.

What this means to me is that we should expect the wild market ride to continue as the battle over the details in the coming months.  Also, take note that this Friday, the Federal government could shut down unless a budget deal can be agreed upon by Congress.  The major sticking point is the border wall.  If that’s not enough turmoil, the president plans to exit the NAFTA agreement in a force Congress to pass the newly negotiated agreement!  The President declared Wednesday a national day of mourning with the passing of former president George H. Bush which will also close the stock market for the day.  Plan your week accordingly and don’t be surprised to if we experience some hyper-volatility and big overnight swings in the days ahead.

Trade Wisely,

Doug