Partial Deal Done…Mostly

Markets ran higher at the open Thursday on a Presidential tweet touting that a phase one trade deal with China is close.  During the day additional leaks claimed it was a “done deal.”  As we should have expected with this story, at the end of the day it was confirmed that a phase-one deal was “done”…except that President Trump had not signed off on it yet.

The net result was that the bulls ran strongly most of the day.  The SPY ended up 0.87%, the DIA up 0.80%, and the QQQ up 0.75% leading to new all-time high closes in all three major indices.  This caused the VXX closed down sharply -5.92%.  Meanwhile, T2122 is inching back toward the over-bought area, now at 78.98.

After hours the President did finally sign-off on the phase-one partial deal, but that while terms have been settled the legal text of the agreement has not yet been written.  (Soooo…it’s done, but not done, close but not quite.)  At any rate, it is being reported that new tariffs are off the table, existing tariffs will be rolled back about 50%. In exchange, the Chinese have agreed to buy $40 billion in US goods.  (This includes the $24 billion/year in Ag products they had been purchasing before this trade war plus an additional $16 billion in other goods.  For reference, the US imports $540 billion/year in goods from China and prior to the trade war China imported $120 billion/year from the US. So, it’s not exactly a major change.  Nonetheless, it will be claimed as a victory and markets are likely to continue their run on this news.

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In other news, Congress agreed to a “deal in principle” for a $1.37 Trillion spending bill to avoid a Government shutdown.  Federal funding will run out on Dec. 20 if a deal is not passed and signed.  This basically adds another $100 billion to the budget, but significantly, it does not back-fill the money President Trump unilaterally took from the military to pay for beginning construction on his border wall.  So, there is no word yet on if the President will sign the bill agreed on by the Senate and Congress.

In the UK, Boris Johnson has won a very comfortable majority in Parliament. (The largest majority since 1987.)  This means Johnson will remain PM, no longer need a coalition and that his Brexit plan has the votes needed for approval.  Presumably, this means the UK will leave the EU in January.  The British Pound surged on this outcome.

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The major economic news Friday includes Nov. Core Retail Sales (8:30 am) and Business Inventories (10 am).  There are no major earnings reports on the day.  

Overnight, Asian markets were all in the green.  In Europe, markets are also all bullish.  As of 6:30 am, U.S. futures are pointing to a half percent gap higher.

Impeachment remains the main domestic story, but (purely coincidentally I’m sure) the partial phase-on trade deal agreement will overshadow this for markets.  With that overhang out of the way and no economic news Friday, the bulls will likely keep running to the upside.  The temptation will be to get caught up in chasing this surge.  Just remember we are at all-time highs and will be extended again soon.  So, trade the chart we are presented, but don’t expect it to last forever.  We all know market move in zig-zags.  Continue to take profits, move stops, plan your trades, and trade your plans. 


No Swing Trade Ideas for Friday. Trade smart, take profits along the way and trade your plan. Also, do not forget to check for upcoming earnings. Stocks we mention and talk about are not recommendations to buy or sell.

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