Conflicting Trade Deal News

Stocks bounced back Wednesday (at least in terms of gapping) after the previous three down days.  An anonymous Bloomberg report claimed progress was being made on how many tariff rollbacks would be part of phase one (partial) trade deal with China.  This was enough for the bulls to gap again.  However, there was no follow-through in the DIA and QQQ.  Meanwhile, the SPY did manage a small bit of post-gap gain.  The SPY ended up 0.62%, the DIA up 0.56% and the QQQ up 0.51%.  However, it is worth noting that all three remain below their Monday close.

In trade news, we’ve gone from back-and-forth rumor/leaks/reports to the even more bizarre.  This morning Bloomberg is reporting positive spin, saying China is in close contact with the US and the US negotiators are confident in a phase-one deal before Dec. 15.  Meanwhile, CNBC and others are reporting China is giving little indication of progress and are remaining silent, except to reiterate a weeks-old statement that any phase-one deal must include tariff rollbacks…not just forestalling new tariffs.  Regardless of which (or either) may be true, markets seem to be taking this as bullish news. 

On the political news front, President Trump abruptly left the NATO meeting after turmoil between himself and other leaders (including being corrected by President Macron during a joint interview and being the butt of jokes between other leaders).  Elsewhere, North Korea must have felt it wasn’t getting enough attention.  So, it warned the US to prepare for a “Christmas gift” as its self-imposed deadline for progress on a nuclear deal approaches.

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In economic news, ADP Nov. Private Payrolls were a big miss (coming in at 67,000 versus 145,000 expected).  ISM Non-Mfg. PMI also was light (53.9 versus 54.5 expected).  In addition, US Oil inventories were much, much higher than expected (2.5 times predicted). This last report comes as OPEC says it is considering deeper production cuts (although each OPEC member wants other countries to do the cutting).

Major economic news for Thursday includes Imports, Exports, and Initial Jobless Claims (all at 8:30 am), as well as Oct. Factory Orders (10 am).  Major earning reports will include BF.B, COO, DG, KR, TIF, and ULTA. 

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Overnight, Asian markets were all in the green.  The same is true in Europe, as all the burses (except the FTSE) are green at this point.  As of 7:30 am, U.S. futures are all pointing to a gap higher of about 0.3% to half a percent.

So, we may be looking at another gap up this morning.  Bulls have definitely looking for any reason to run the last couple months.  However, there have been some warning signs (ie. Weak Mfg. data) and reasons to worry (blow-off top action?).  That being the case, it would be wise not to chase too far either direction.  Stick to your trading plan, keep locking-in profits, and move your stops.  Our job is to make consistent gains and reduce risk.  We’re not here to hit the lottery.


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