Whoopie. Wheee. Bullilsh traders sing, "Happy days are here again." The couple-week topping saga continues. The happy trade news hype is fed to markets each day via an intravenous drip. As expected, happy US-China trade news occurs on Sunday afternoon, US time, right before the futures markets open. The communists say they are making progress with the US in addressing IP (intellectual property) theft. This is a big issue in the negotiations so global stocks and futures rally higher.
Of course it is likely more bluster being blown up trader's butts but like Grandpa Jones would say when he sat under the elderberry tree sipping whiskey, "it'll cure what ails ya." By introducing the IP news, that takes the trade talks to a new level. Remember, the so-called phase one deal was supposed to be done and dusted by now and not include the IP and enforcement stuff. So perhaps the two sides are talking big picture again.
China has a demand that the tariffs be lifted or reduced in some fashion for any deal to take place. Soybean Donny is realizing that if he agreed to this, that would place a firm ceiling in his negotiating leverage going forward. China is succeeding in its goal to keep pushing things forward since the US presidential election will be dominating the news coverage from January on. Dirtbag President Xi is dictator for life. Soybean Donny may be selling used cars at 5th and Vine a year from now.
So the happy trade deal news where the United States and China may be pushing forwards to solve the IP theft problem sends the stock market to new all-time record highs. Sound the Seven Trumpets!! This time the communists provide the upside energy and the charts are pricing-in the joy. The S&P 500, the US stock market, prints 3133.83, the highest number in history, and also a new all-time closing high at 3133.64, on Monday, 11/25/19.
More happy trade talk news overnight. There was a phone call between the top Chinese and US negotiators. This happy talk pumps US futures higher on Monday evening, however, the luster comes off the rose and overnight, the futures drift back to the flatline. Global traders realize what is missing in all the trade news hype since Sunday evening is the US side commenting. Treasury Secretary Mnuchin and Trade Representative Lighthizer (chief negotiator) are quiet.
The Fed receives the football toss from the happy trade talks and Chairman Powell runs for a bullish touchdown proclaiming that he sees "the (economic and market) glass as much more than half full." The consensus remains bullish and complacent. A handful of analysts now call for a slight pullback in the stock market but they are telling everyone to buy any dip. There are no bears in the market.
The CPC spiked higher last week to tap 1.20, the start of the panic and fear zone, which helped stocks recover and rally. However, the CPC drops again and the CPCE remains subdued and the uber low put/call ratios have not been resolved. Complacency continues to signal a stock market top at hand. Stocks are saved by the daily happy trade deal news and Fed easy money policies. Equities are typically buoyant around the Thanksgiving Day holiday. The new moon peaks in about 3 hours and stocks are usually weak moving through the new moon so that will be interesting to watch. The new moon negativity may be offset by holiday joy.
The SPX daily candlestick chart above shows the gap-up glory yesterday and new all-time record highs (neon green boxes). The bulls channel their inner Zoolander and proclaim, "It's beautiful!" This type of momentum move you need to give a day or so to digest but you can see how the higher high in price (due to the new trade deal news that was unknown) comes with universal negative divergence across all indicators. As long as any of the indicators do not go above those thin red lines in the right margin, the top is in.
Those three big selling volume days are solid distribution the smart money passing off shares to Zach the Fool, Carl Clueless and Sally Sucka. The investment banks count on the dumb money coming in to buy right now on all the new record high hype; it makes it easy to slough off shares to the bagholding dolts. It's fun. It's sport for many professional traders. Joe Sixpack and Amy Retail are afraid they are missing the stock market train leaving the station so it is easy to capitalize on their novice greed.
The ADX surprisingly flatlines. It was headed higher and about to identify the long rally as a strong uptrend (high 20's and higher) but alas, it bumps sideways and continues to refuse to call the big rally a strong trend. The last strong trend was down during the August crash but the happy trade deal talk and the Fed and other global central bankers colluding and riding to the rescue saved the day, as always.
The Aroon green line is pegged at one hundo with nowhere to go but down which is bearish and the red line is in the cellar with nowhere to go but up which is bearish. Watch for the potential negative cross. On balance volume is also in neggie d. As mentioned several times over the last couple weeks, the rising wedge pattern is ominous since the failures can be quick and devastating; huge cliff-like collapses. Price has not come back to kiss the 20-day MA at 3089 (which is also the center band) in 7 weeks which is a long time. A mean reversion is needed with price extended above its moving averages.
Price has lightly tapped the upper standard deviation band but considering the momentum spurt yesterday, the upper band at 3143 must be respected. That would be 9 more points of upside. If the SPX closes above 3138, then 3142 would be in play. On the downside, the middle band at 3089, and rising, is on the table as well as the lower band at 3035, and rising.
Keybot the Quant flipped long yesterday but the stock market direction is essentially a coin-flip right now. The quant is fixated on copper so 'as copper goes, so goes the market'. Copper futures are currently trading down -0.2%. S&P futures -1. VIX 11.95. The 11-handle on the VIX verifies the relaxed nature of traders currently. Investors do not have a care in the world since a trade deal is likely and central banks will always support the stock market forever. In the immortal words of Alfred E. Neuman, "What? Me Worry?" What can possibly go wrong especially with the joyous holiday season beginning? As Irving Fisher would say, 'it feels like we are on a permanent plateau."
Some of the sogginess in futures is due to traders realizing that the window for a Trump-Xi summit to sign a phase one trade deal is quickly closing. December begins on Sunday. Of course the communists will be content with kicking the can down the road. The Chinese have done an end-around President Trump increasing their soybean and other ag imports from Brazil and Argentina to the detriment of US farmers. Ironically, some farmers that touted King Trump as the greatest thing since sliced bread voting and electing him in 2016, have lost their farms in 2019. Such is life, and crony capitalism.
There are only three trading days remaining in November; today, tomorrow and a half-day Friday (EOM). When a month is trending up from start to finish, like now, there is usually give-back during the last couple days or so of the month. The Godot Top remains elusive as the daily happy US-China trade deal soundbites hit the tape. You are watching epic stock market history unfold in real-time. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added 7:48 AM EST: S&P futures flat. VIX 11.88. Copper flat. The hourly charts will be key today to identify the top. The Whitehouse and the Chinese commmunists, however, may paint the stock tape green into the weekend with cleverly-timed happy trade talk news bites. Note that the happy news bite on the overnight phone call ends in bupkis for the futures. The trade news hype is getting old. Traders are getting antsy to see some actual details instead of listening to bloviating US and Chinese politicians promising wine and roses.
Note Added 9:54 AM EST: Happy days are truly here again as the SPX prints another new all-time record high at 3136.80. Whoa. Check that. Price jumps parabolic to 3137.51 the highest number in stock market history. Traders are intoxicated off the trade deal brownies, washing them down with Fed wine, then buying stocks with reckless abandon. The record highs keep on coming; now 3137.72. Comically, utilities and real estate stocks lead higher. That's hilarious. The S&P 500 prints 3137.97, almost at 3138, the all-time record high. As per above, 3138+ is a key level since it would open the door to 3142+. The indicators on the SPX daily chart remain in neggie d as price prints new record highs.
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