The S&P 500 prints a new all-time record high at 3182.68 and new all-time closing high at 3168.80. The bulls are shiny happy people dancing and singing, buying stocks without a care in the world. The euphoric joy is evidenced by the low put/call ratios and VIX sporting a 12-handle. Traders are throwing darts at the stock pages placing client's money in any stock with a heartbeat. Everyone is celebrating since even if the stock market sells off, the Federal Reserve and other central banks will step in to save the day. Even Johnny the shoeshine boy is telling everyone that the 'central bankers are the market'.
It is interesting to note that the discussions on 'moral hazard' began in 2009 after former Fed Chairman Bernanke began QE 1 to save the stock market and protect America's wealthy class. Over one decade later, and now everyone expects rich Uncle Fed to always save the day, picking-up the check for our ongoing financial misbehavior. The Fed can print money forever, or can they?
The happy US-China trade deal talk jump-started the Friday rally in stocks. S&P futures jumped +10 handles on the news that the US and China agree to a Phase One trade deal. President Trump used to say he wanted a big deal or no deal. You will not hear him say this anymore since now it is sliced into phases, how many, no one knows. Donny does not know. Perhaps Phase 18 will be the final final deal.
Futures were joyous on Friday morning until shortly before the US opening bell. China announced that a press conference will take place at 9:30 PM their time which is 9:30 AM EST exactly when the stock market opens. It is hilarious to see nations learn from Trump and then use his same methods to counter punch. King Donny gooses the markets with happy tweets timed with the stock market opening; now the communists create angst ahead of the US opening bell. You have to love it.
S&P futures tank from up +14 to down -5. Interestingly, the Chinese presser is then delayed until 10 AM local time which is 10 AM EST. Keystone bets dollars to doughnuts that Soybean Donny got on the horn to talk to ole Dictator Xi and find out what is up with the presser. Of course he did because you do not hear any Whitehouse comments about the delay. That means Trump called Xi not the other way around since Donny would have bragged if Xi had called him. This stuff is not rocket science.
So the communists hold their presser at 10 AM EST and the stock market oscillates to and fro as it did for the remainder of the Friday session. Investors and traders are in a quandary because a great trade deal is announced in Trumpian braggadocio fashion but as the lady said in the hamburger commercial many years ago, "Where's the beef?" President Trump brags that the deal forces China to buy $50 billion in ag goods but he will not provide a definitive timeline for when these Chinese purchases will occur. Donny says, "Soon." Then the president says the $50 billion ag number may include equipment and manufacturing purchases. That's comical. Trump is saying the number does not apply solely to soybeans and grains; that's news.
Trade Representative Lighthizer is quoting a $40 billion number for the deal instead of $50 billion; perhaps he needs to talk with Soybean Donny so they can recount the bushels. The left hand does not know what the right hand is doing. Fox News reports that the deal is $50 billion over two years which contradicts the president saying that commitment will be met shortly by China. There are few details available on the trade deal and surely over the next few days they will come to light. Now both sides are talking about a signing of the phase one deal in January so again, the deal is not actually done yet, it may not be signed for another month. It is nauseating to watch. Today's society revolves around politician's half-truth's and bull-sh*t. In America, the public understands this fact more each day.
Over the last few years, the peak ag imports to China are $27 billion running say from the low 20's to 27 each year. Trump's trade war harpooned this industry. China retaliated against tariffs by attacking the US farmer and reducing soybean and other ag purchases. The communists know that the US farmers voted for Trump and make up a big portion of his base (if Trump is not re-elected in 11 months, China may figure that their trade problems go away). China now acquires soybeans and other ag products from Brazil and Argentina and will obviously remain diversified here forward since the US supply has proved unreliable.
President Trump wanted a trade deal badly since he is concerned about the erosion of support from the farmers. Over one-half of the states in the US are now experiencing farm bankruptcies. Trumpster is trying to make things right to smooth his path to reelection. If the $50 billion is over two years, that is $25 billion per year imports to China exactly where the US was at before the trade war. In other words, Donny has received buptkis. Trump wants to lump in purchases of expensive DE tractors and CAT and CMI equipment so he can brag about the billions and billions of ag products he gained in the deal. It is only games and illusions by the magician politicians. Always remember, truth does not matter, only perceptions matter.
Soybean Donny thinks he can hike tariffs against China again in the future and keep playing the trade war game, however, no, he cannot. Trump has taken tariffs in reverse so as far as the markets are concerned, the drama is over. Tariffs will no longer increase and will only be reduced which could only help, albeit marginally in the near-term, to boost global GDP. If Donny expects to be reelected, and then begin the tariff game again, that is likely a losing proposition. Now that the tariff game has ended, traders and investors do not expect to see an escalation again. If that is Trump's plan, it will likely tank the stock market in the future.
At the same time that the trade saga continues, Prime Minister Boris Johnson wins the UK election creating a happy tone across global markets. Stocks were soggy and flat-lining all day Friday as the trade deal news was digested. The Trump administration needs to put some meat on the bones of the deal with specific details. Nothing has changed with the 2-hour chart. It was very popular by all of yinz in cyber space so Keystone figured an update would be useful.
The same ominous rising wedge pattern is in play. The RSI and stochasitcs are at or coming off overbot territory agreeable to a pullback in price. The red lines show universal neggie d across all indicators wanting to see a spankdown in price. The MACD line has the tiniest bit of bull fuel in the tank (tiny green line), it looks like fumes, which may be able to create a jog move of down-up, but that would be it. The MACD is negatively diverged across the two-week and six-week period so this could fail at any time. The stock market has topped-out, or, it will top-out within 4 hours of trading on Monday that would be between 9:30 AM EST and 1:30 PM EST.
Keystone's 80/20 Rule says 8's lead to 2's and 2's to 8's so the record high above 3180 is key. If one or two closes occur above 3180, the door will be wide open to 3220. Remember that the breach of 2800 opened the door to 3200. Conversely, if the SPX is unable to ever close above 3180, then the very long-term, multi-month, and multi-year stock market top, is likely in. Pay attention to the 3180 level.
The SPX violated the upper standard deviation band (purple) so the middle band at 3149 is on the table as well as the lower band at 3120. The chart is cooked. If you did not sell the long/s you were planning to sell on Friday afternoon, you made a mistake. The only thing that can save the day is more happy news over the weekend. The happy trade news appears priced-in.
Copper was up over +1.0% overnight Thursday into Friday morning but lagged ever since turning negative finishing down -0.4%. The happy trade deal occurs and copper sinks -1.5% intraday; that's not good. Doctor Copper was feeling better each day this month considering the trade deal hype but now feels woozy and lays back down on the gurney. Once the US-China trade deal details are released, probably in a drip-feed, that may create market negativity.
Traders are complacent and euphoric for the last month and the daily and hourly SPX charts have been topping out for the last couple weeks or so. The happy trade talk and central bank easy money promises always save the day. The trade deal news is known now, and this year, that was goosed by over 20 global central banks, is ending, but what is the plan for 2020? Earth to Suzy. There is no plan.
Perhaps a Black Monday is in our future? The market is very erratic and unstable so it would not be surprising to see a flash crash or some other crazy event come out of left field. Santa may deliver coal in Wall Street's stocking over the coming days. 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.
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