A massive overnight reversal of market sentiment after China announces its willingness to return to the negotiation table and the President speaks favorably of a future deal.  Indeed very encouraging but I would expect the market to remain very news-driven as they attempt to hammer out the details.  There is obviously a lot at stake here for both countries so I would guess a completed deal could still be months away.

Overnight the Yuan slid to an 11-year low, and Asian markets experienced an ugly selloff across the board.  This morning European markets are mixed but have recovered from the lows after signaling the resumption of US-China negotiations.  US Futures, although fluctuating wildly, point to a substantial gap open ahead of earnings reports and a Durable Good number that consensus estimates expect will decline at 8:30 AM Eastern.  Hang on tight; the price volatility is likely to remain quite high this morning as the market reacts.

On the Calendar

On the Monday Economic Calendar, we have 30 companies reporting results with none that are particularly notable.

Action Plan

As China and US lobbed tariff bombs back and forth on Friday, it was looking pretty grim with the US Futures declining 300 points at the open yesterday.  However, during the night China trade officials called the US, interested in re-engaging in negotiations.  The future responded in kind not only recovering losses but as of now point to a positive open.  I’m not exactly sure how an agreement to talk warrants such a big change in sentiment, but I’ll take it and happy to see the change this morning.

Unfortunately, even with the big overnight reversal significant technical damage was created in the index charts with Friday’s selloff.  News of a trade deal could quickly correct the damage, but I doubt a return to the negotiation table will do the trick.  Both countries have a lot at stake, and I would expect a lot of tough talk in the near future as they try to hammer out their differences.  Expect more drama as this battle continues to unfold.

Trade Wisley,

Doug