Futures Fall Despite Solid EPS, Retail Sales Miss, Brexit Deal Remains Elusive

Futures Fall As Worries Creep  Back Into Focus

The U.S. equity market is indicated lower in early Wednesday trading despite signs 3rd quarter earnings are better than expected. The Dow Jones Industrial Average and S&P 500 are both indicated lower by 0.20% while the NASDAQ Composite is down about -0.30%. The move is driven by growing concern China will not follow through on its pledge to buy more U.S. agricultural products. If this is the case it is likely additional tariffs will be enforced later this year. China has pledged as part of the Phase I trade deal to buy up to $50 billion in U.S. products.

In earnings news, financial stocks Bank of America and Bank Of New York Mellon both reported better than expected EPS. Both companies reported strength in consumer segments that helped drive share prices higher. Shares of BAC are up more than 2.5% while BNY-Mellon is up about 1.5%. In economic news, Retail Sales were weaker than expected. September retail sales fell -0.3% versus an expected gain of 0.3%. The mitigating factor is an upward revision to the past month of 0.2%. Later in the session traders will have an eye out for the NAHB Index and the FOMC’s Beige Book.

Europe Mixed, Brexit Deal Is Still Elusive

European markets are flat and mixed at midday as traders fret over trade and the Brexit. On the trade front, China’s demands the U.S. remove the threat of more tariffs before signing the Phase I deal has thrown a wrench into the works. At this stage it is becoming less and less likely Phase I will come to fruition. In Brexit news, negotiations stalled on Wednesday despite a narrowing of differences. The Irish PM confirms the back-stop is yet to be resolved but there is hope. The two sides will begin a two-day summit tomorrow that will, hopefully, result in a deal.

The German DAX is in the lead at midday with a gain of 0.22% while the FTSE and CAC are both edging lower. In stock news, shares of UK tech giant Micro Focus is up 4.3% on its results as is seafood producer Mowi. At the other end of the rankings, IMCD and DBA Aviation are both down more than -4.0%.

Asia Mostly Higher On Brexit Hopes

Asian markets are mostly higher at the end of Wednesday’s session. The Nikkie and ASX are both up more than 1.0% while the Hang Seng and Kospi are up closer to 0.70%. The moves are driven by hope for a Brexit deal, however elusive it may seem right now. In Hong Kong, leader Carrie Lam is under intensifying pressure as she rejects HK’s bid for autonomy. The Shanghai composite is the only index to move lower, it posted a loss of -0.41%.

Wrong Response by Trump to China’s Countermeasures Threat Could Blow Up Trade Deal

There’s a breaking story out of Asia early Wednesday that could blow up into something major later in the day if U.S. President Trump decides to exacerbate the issue. The current price action in the financial markets indicates a sense of caution may be developing in the financial markets with safe-haven assets – Treasury bonds, Japanese Yen and gold turning higher, while demand for risky assets is edging lower.

According to reports, China is threatening to take countermeasures against the U.S. in response to a bill that favors the Hong Kong protesters, the Chinese Foreign Ministry said Wednesday.

That is a pretty bold threat to make while the United States and China are trying to finalize the first phase of a partial trade deal agreed upon on Friday. It’s also closely similar to the threat China made against the National Basketball Association (NBA) before it caved to pressure from the Chinese government last week after an NBA team official made comments supporting the Hong Kong protesters.

The Background

Three bills were approved in the House of Representatives Wednesday evening, one supporting the right of individuals to protest, another allowing for the U.S. to check on Beijing’s influence over the territory and a third aimed at preventing U.S. weapons from being used by police against protesters.

China’s Response

“If the relevant act were to become law, it wouldn’t only harm China’s interests and China-U.S. relations, but would also seriously damage U.S. interests,” said Geng Shuang, China’s Foreign Ministry spokesperson, in a statement on the body’s website. “China will definitely take strong countermeasures in response to the wrong decisions by the U.S. side to defend its sovereignty, security and development interests.”

Geng said while China was working to restore law and order in Hong Kong, U.S. lawmakers were “disregarding and distorting facts,” by turning criminal acts and violence against police into issues of “human rights or democracy.”

“That is a stark double standard. It fully exposes the shocking hypocrisy of some in the U.S. on human rights and democracy and their malicious intention to undermine Hong Kong’s prosperity and stability to contain China’s development,” said Geng, who urged the U.S. to “stop meddling.”

Trump’s Problem

Last week, CNN reported, Trump, in a call with Chinese President Xi Jinping, promised that the U.S. would stay quiet on the Hong Kong protests while the two countries continued to negotiate a possible end to the ongoing trade war.

Early Wednesday, traders are taking precautionary positions in response to the comments from China’s Foreign Ministry Spokesperson. Bonds, gold and Japanese Yen are being bought and stocks in the U.S. and Europe are being sold.

What traders could be waiting for is Trump’s response. Will he defy his promise to Chinese President Xi Jinping, or will he remain silent?  It’s highly unusual for Trump to remain silent for too long especially when a foreign country threatens the U.S. with “strong countermeasures.”

Traders should keep an eye on this story because it could develop into something major during the trading session. Somewhere, somehow, somebody in the press may try to push Trump’s button’s to get a response, and if they push the wrong one, Trump could say something to shake up the financial markets.

Trump certainly knows how to pick his battles. He’s usually quick to respond to comments from CEO’s, coaches, athletes, politicians and celebrities. However, if he doesn’t speak up, he’ll show the world that he just gave in to pressure from China, the country he keeps saying is weaker than the United States.

Two-Weeks Before Fed Meeting, Policymakers Remain Divided Over Rate Cut

It’s not too early to start thinking about the U.S. Federal Reserve’s next move on interest rates. With two weeks to go until their next monetary policy meeting on October 29-30, U.S. central bank policymakers appear unconvinced phase one of a partial U.S.-China trade deal is enough to dismiss the policy uncertainty that has weighed on U.S. economic growth for months.

At the same time, Federal Reserve decision-makers remain far from united behind additional rate cuts beyond the two cuts they made in July and September with unemployment at a 50-year low and consumer spending strong.

On Tuesday, it was San Francisco Fed President Mary Daly and St. Louis Federal Reserve President James Bullard’s turn to voice their opinions about the direction of interest rates.

Off-Setting Views

On Tuesday, Daly told reporters after a speech at the Lost Angeles World Affairs Council & Town Hall, “Right now, I see the economy in a good place, and policy accommodation in a good place.”

However, businesses retain an overarching sense of uncertainty, Daly said, even though “the gusting (of headwinds) seems to have gone down a little bit on the news of some progress on Brexit, some progress on trade negotiations between the U.S. and China.”

Current weak inflation levels, and a three-year inflation outlook among U.S. consumers falling to its lowest level on record, has caught her eye.

On Tuesday, a report showed the inflation outlook among U.S. consumers remained muted in September, rising slightly over the near-term but falling to the lowest level on record over a three-year time frame since the New York Federal Reserve began its monthly survey of consumer expectations in 2013.

Although Daly expressed some concerns over low inflation, she still expects it to rise back to the Fed’s 2% target, and believes the Fed’s two rate cuts so far this year, in July and September, will help sustain the longest U.S. expansion in history.

“In terms of what to do going forward, I would like to see additional data, because the economy is in a really good place right now,” Daly said.

Speaking in London, Bullard painted a gloomier picture. Like Daly, he sees what he called continued “trade regime uncertainty” as a key risk to the U.S. economy. However, he also put more emphasis on continued weak inflation and slowing global growth.

Unlike Daly, who sees Fed policy as currently “slightly accommodative”, Bullard said on Tuesday in his view policy may be “too restrictive”.

As a result, the Fed “may choose to provide additional accommodation going forward, but decisions will be made on a meeting-by-meeting basis,” Bullard said.

Fed Still Divided

Two weeks before the Fed’s interest rate decision, and policymakers still haven’t budged from their September meeting positions.

One group like Fed Chair Jerome Powell believes the outlook is generally positive. Another believes the U.S. economy needs even easier policy to avoid sinking into a recession. Still a third group believes the Fed has gone far enough or even a little too far in trying to revitalize the economy. Their biggest fear is a too-easy policy could lead to financial instability if investors take on too much risk and asset values get stretched.

As of Tuesday’s close, investors expect Fed policymakers to reduce rates when they meet October 29-30. According to the CME FedWatch Tool, the latest probability of a 25-basis point Federal Open Market Committee (FOMC) rate cut is 75.4%.

The focus ahead of the next Fed meeting will be on U.S. economic data. This week, the key report is Retail Sales. Next week, it’s Durable Goods. On October 29, the Conference Board releases its Consumer Confidence report. On October 30 while the Fed is meeting, a report on Advance GDP will be released.

Unfortunately, Fed members won’t have the chance at this meeting to react to data on Personal Spending and the Core PCE Price Index.

Additionally, ISM Manufacturing, which last month posted its second consecutive contraction, will be released on November 1 along with the October Non-Farm Payrolls report.

This could be a problem for Fed members because some may favor another rate cut in anticipation of a weak ISM Manufacturing report, and some may pass on a rate cut due to expectations of a solid jobs report.

Impressive Earnings Reports Provide Clarity for Investors

What a relief! Finally a day when we didn’t have to watch the box all day scanning for meaningless U.S.-China trade talk headlines Yes, earnings season began with a flurry of activity on Tuesday, allowing us to focus on the reports and only the reports. It certainly made trading easier because the numbers were cut and dry. There was very little to read into, very little was left to interpretation. The reports were either bullish or bearish.

In the cash market on Tuesday, the benchmark S&P 500 Index settled at 2995.68, up 29.53 or +1.01. The blue chip Dow Jones Industrial Average finished at 27024.80, up 237.44 or +0.91% and the technology-driven NASDAQ Composite Index closed at 8148.71, up 100.06 or +1.27%.

The big takeaway this week for traders is the impact of clarity. We learned on Monday that a lack of clarity usually has a negative impact on investor decisions, encouraging them to shed risky assets. Tuesday taught us that clarity over earnings brings them right back then.

Since it’s “the market”, I don’t expect bullish earnings reports to line up like they did on Tuesday. We’re likely to see days featuring mixed reports. Furthermore, we’re likely to see both bearish and bullish headlines on the progress of the trade talks. For that matter, you can throw in headlines about Brexit. Since we’re coming down to the deadline set for October 30, this phenomena has been capturing its share of headlines lately. It was reported on Tuesday that upbeat news over Brexit contributed to the rally.

Investors Bullied by Headlines

As I wrote earlier, this week’s price action in the stock market has been all about the impact of clarity on an investor’s decision process. I’m sure you heard the old adage, “when in doubt, stay out” for investors looking to enter a new position, and “when in doubt, get out” when holding a position.

In my opinion, trying to keep up with the headlines is primarily behind trader indecision. Furthermore, traders have even built algorithms to generate buy and sell signals on key words. This could be the source of stock market volatility also. Additionally, even the headline writers at Bloomberg, Reuters and CNBC aren’t telling you anything useful. Most of the time the headline is late and the story is stale by the time traders act upon it.

I think you’ll have more success if you react to numbers in a report and the price action than a headline unless the headline is stating a fact. Any headline implying hope, fear or greed is dangerous.

Last week, CNBC’s Jim Cramer warned against trading stocks on the roller coaster of U.S.-China headlines. Markets are “hostage to events that are not only totally out of our hands, but totally out of the president’s hands,” Cramer said on “Squawk on the Street.”

“I am describing an unfathomable market,” declared, “where if you have conviction, you are out of your mind,” meaning fundamental cases for buying or selling are useless.

Just the Fact Ma’am

If you’re going to trade the headlines then look for something that states a fact. On Tuesday, Reuters said, “JPMorgan Hits Record High, Lifts Bank Stocks, UnitedHealth Eyes Best Day in Eight Years, and JNJ (Johnson & Johnson) Set for Biggest One-Day Percentage Gain Since January. Those are facts.

“Brexit Deal Hopes Brighten Sentiment” – “Hope and Sentiment” – the kiss of death for traders. Clarity breathes life into a market.

US Stock Market Overview – Stock Rally Driven by Healthcare and Robust Bank Earnings

Stock prices moved higher on Tuesday as riskier assets gained traction. As stock prices move higher, US yields move in tandem. The higher yields reflect the market’s belief that a trade agreement could occur. Better than expected earnings were released on Tuesday in the banking sector which buoys the US stock market, raising yields and pushing gold lower. Most sectors were higher, driven by healthcare, and technology shares, consumer staples, and utilities bucked the trend. Financials were also a robust performer following stronger than expected earnings.

Banks Beat the Street

In the banking sector, shares of JPMorgan Chase, rose 3.25% after the bank reported better than expected financial results. The company continued to see strength in both its consumer and investment-bank businesses. JPMorgan reported a profit of $9.08 billion, or $2.68 a share. Expectations had been for earnings of $2.45 a share. A year earlier, the bank reported a profit of $8.38 billion, or $2.34 per share. Revenue from non-lending operations at the bank jumped 13% to $15.11 billion. In the bank’s consumer unit, revenue rose 7% to $14.26 billion and in the corporate and investment bank it rose 6% to $9.34 billion.

Citi also beat on the top and bottom line. Citi reported earnings of $1.97 per share versus expectations that the company would earn $1.95 per share. Revenue came in at $18.6 billion versus expectations that the firm would post revenue of $18.545 billion. Fixed-income trading posted revenue of  $3.211 billion versus expectations of $3.09 billion. Net interest margin came in at 2.56% versus 2.66% forecast.

Not all the banks beat. Goldman Sachs disappointed. The company said that profit slumped 26% to $1.88 billion, or $4.79 a share, below the $4.81 expected. Revenue fell 6% to $8.32 billion, slightly above the $8.31 billion expected, on lower results in the firm’s investing and lending and investment banking divisions.

Healthcare Rallies on J&J Earnings

Healthcare was the best performing sector in the S&P 500 index following robust financial results from Johnson & Johnson. The company reported earnings per share $2.12 versus $2.01 expected. Revenue came in at $20.73 versus $20.07 billion expected. J&J also raised its full-year guidance and now sees earnings of $8.62 to $8.67 per share, with revenue in the range of $81.8 billion to $82.3 billion. Prior to the report, analysts were expecting full-year earnings guidance of $8.53 to $8.63 a share on revenue of $82.4 billion to $83.2 billion.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Bullish as Long as 26727 Holds as Support

December E-mini Dow Jones Industrial Average futures surged on Tuesday in conjunction with a jump in the cash market on the opening. Stronger-than-expected corporate earnings reports earlier in the session were the catalysts behind the early strength.

J.P. Morgan Chase kicked off things with third-quarter numbers that topped analyst expectations. The company’s revenue also hit a record, boosted by home and auto loans along with credit cards. The news helped drive shares up more than 2%.

At 13:36 GMT, December E-mini Dow Jones Industrial Average futures are trading 26855, up 109 or +0.41%.

Shares of Johnson & Johnson were also up more than 2% after its third quarter numbers were lifted by higher sales of cancer and other prescription drugs. Shares of UnitedHealth, another Dow member, rose 2.9% after the company posted a quarterly profit that topped analyst expectations by 13 cents per share.

E-mini Dow Jones Industrial Average
Daily December E-mini Dow Jones Industrial Average

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through 26975 will signal a resumption of the uptrend. The main trend will change to down on a move through 25983.

The Dow is posting an inside move for a second straight day. This suggests investor indecision and impending volatility. Bullish traders are hoping better-than-expected earnings news will offset worries over U.S.-China trade relations.

The short-term range is 27312 to 25703. Its retracement zone at 26697 to 26508 is support. The market is currently trading on the strong side of this zone, giving the market an early upside bias.

Daily Technical Forecast

Based on the early price action and the current price at 26855, the direction of the December E-mini Dow Jones Industrial Average futures contract the rest of the session on Tuesday is likely to be determined by trader reaction to the uptrending Gann angle at 26727.

Bullish Scenario

A sustained move over 26727 will indicate the presence of buyers. If this move can generate enough upside momentum then look for the rally to extend into the downtrending Gann angle at 26960, followed by last week’s high at 26975. Additional upside targets are minor tops at 27040 and 27112, followed by a downtrending Gann angle at 27136.

Bearish Scenario

A failure to hold and a sustained move under 26727 will signal the return of sellers. The first downside target is 26697. Look for a technical bounce on the first test of this level.

If 26697 fails as support then look for a potential acceleration to the downside with the next target the main 50% level at 26508.

Futures Rise, Earnings Season Off To Shaky Start, Trade Concerns Dampen Investor Appetite

The U.S. Futures Are Rising In Early Trading

The U.S. indices are indicated higher in early trading as earnings season kicks off. Today’s news includes reports from more than a half-dozen important names and the results are mixed. The big banks are the main focus as JP Morgan, Goldman Sachs, Wells Fargo, and Citigroup all report. JP Morgan posted a nice beat on the top and bottom lines driven by strength in consumer lending. Citigroup, Goldman Sachs and Wells Fargo are all trading lower after reporting weaker than expected numbers.

In other news, United Health and Johnson & Johnson both beat expectations. Johnson & Johnson also reports strength in the consumer units while United Health upped its full-year guidance. Both stocks are moving higher by roughly 2.0%.

The Down Jones Industrial Average, S&P 500, and NASDAQ Composite are all up about 0.25% in early trading. The sentiment is buoyed by trade hopes but also tempered by caution. While China and the U.S. have signaled a Phase 1 deal is at hand there is still no deal in place. Until such time traders are cautioned to be prepared for negative headlines. On the economic front, the Empire State Manufacturing Survey rose modestly to 4 from last months 2.0 as production and employment edge higher.

European Markets Are Mixed, Hope For A Smooth Brexit Persist

European markets are mixed at midday on Tuesday after remarks from the EU’s Brexit team renewed hope. Michel Barnier said that despite the increasing difficulty it is still possible to reach a deal this week. The DAX and CAC are both up about 0.35% to 0.40% while the FTSE is down roughly -0.25%. Retail is in the lead with a gain of 0.90%.

In economic news, unemployment ticked higher in the UK. The 3rd quarter figure came in at 3.9%, a tenth higher than the previous. In stock news, shares of Hays are up 5.5% after it reported flat results. The good news is weakness in the UK was offset by strength in offshore markets. Share of Wirecard, however, are not so buoyant. The Financial Times did an expose on the company’s accounting practices and shares are down -17% because of it.

Asia Mixed, Trade Hopes Clash With Trade Fears

Asian markets are wildly mixed after Tuesday’s session. The Japanese Nikkei led the market with a gain of 1.9% after being closed Monday for holiday. Chinese indices are broadly lower following the release of inflation data. CPI rose 3% on a 69% increase in pork prices while PPI fell. The Shanghai Composite is down -0.56% on the news, the Hang Seng a more tepid -0.07%. Elsewhere in the region, the ASX and Kospi are both up mildly.

Wall Street Investors Gearing Up for Earnings Season

After Monday’s lackluster trade, due to the extended holiday week-end, stock market investors will be gearing up for the start of earnings season, which kicks off on Tuesday with 52 S&P 500 companies expected to report by the end of the week. Here are the most important factors to consider before trading on Tuesday.

Big Banks on Deck

Investor focus will be on the big Wall Street banks as J.P. Morgan Chase, Citigroup, Goldman Sachs and Wells Fargo are expected to report on Tuesday, Bank of America on Wednesday and Morgan Stanley on Thursday.

According to Reuters, “The big U.S. banks are expected to report a 1.2% decline in earnings due to falling interest rates, a raft of unsuccessful stock market floatation and trade tensions.”

FactSet is expecting S&P 500-financial company earnings to drop 2.6% this quarter, weighed down by the Federal Reserve lowering interest rates twice since July, which pressures bank’s main business of deposits and lending.

Overall Earnings Weakness

Reuters also said, “Overall, analysts are forecasting a 3.2% decline in profit for S&P 500 companies for the quarter from a year earlier, based on IBES data from Refinitiv.

Analysts at FactSet presented a more bearish outlook, saying as the season kicks into gear this week, S&P 500 firms are expected to report a 4.6% earnings decline over the same period a year ago. If the period ends up with a negative number, that will make three quarters in a row, the first time that’s happened in three years.

Quarterly Market Outlook

Analysts at Edward Jones are saying, “Stocks appear on track to finish the year strong, with the S&P 500 near a record high, despite a volatile past quarter during which slower global growth and trade tensions caused recession fears to spike.”

“Twists and turns on the U.S./China trade front continue to drive market swings, with stocks rising last week on optimism that both sides are looking at a phased approach to a trade deal, which was announced after market close on Friday.”

“This incremental progress is encouraging, but additional phases of agreement or a larger deal that includes key issues like intellectual property, technology transfers and enforcement will likely take more time.”

“Thus, trade issues will remain a source of volatility. More broadly, we expect stocks to continue to rise but at a slower pace than they have over the past few years, supported by ongoing economic growth, earnings growth and lower interest rates.”

US Stocks Retreat on Trade Deal Uncertainty, but Losses Dampened by Light Holiday Trade

The major U.S. equity indexes settled slightly lower on Monday in a generally lackluster trade due to the U.S. Columbus Day holiday. Although it was not an official U.S. bank holiday, several banks were closed as well as the Treasury market. The price action suggests many of the major investment firms took advantage of a long-holiday weekend.

In the cash market on Monday, the benchmark S&P 500 Index settled at 2966.15, down 4.12 or -0.14%. The blue chip Dow Jones Industrial Average finished at 26787.36, down 29.23 or -0.11% and the technology-based NASDAQ Composite closed at 8048.65, down 8.39 or -0.11%.

Stocks Pause

U.S. stocks paused on Monday after posting gains the three previous sessions as a lack of clarity over “phase one” of a U.S.-China trade agreement weighed on investor sentiment, while investors enjoyed an “unofficial” holiday, ahead of the start of the third-quarter earnings season.

Investors were upbeat at the start of the futures market session on Sunday after the S&P 500 and Dow Jones indexes ended Friday with their first weekly gain in a month and President Trump signaled the two economic powerhouses had taken a major step in easing the back-and-forth tariffs measures that have hammered global growth this year.

However, prices quickly retreated after a Bloomberg News report said that Chinese officials would like to continue trade talks before signing phase one of the deal and moving on to phase two.

Additionally, gains were capped after President Trump acknowledged that the agreement could still collapse, while Treasury Secretary Steven Mnuchin said on Monday he had “every expectation” that if a U.S.-China trade deal was not in place by December 15, additional tariffs would be imposed.

The price action suggests investors are still trying to grasp the concept of a trade deal done in phases. However, if investors were really skeptical about the matter, the markets would’ve sold off a lot harder. This indicates they may be comfortable with the idea that both sides are still talking.

Empire State Manufacturing Index Edges Higher

It was a light day on the data front. There were no early session reports, but the Empire State Manufacturing Index was released at 20:00 GMT. The report was posted about 18 hours earlier than expected, due to “technical difficulties”, according to a Fed spokeswoman.

The New York Federal Reserve’s Empire State business-conditions index showed slight improvement in October. The report showed that a rebound in sentiment pushed the headline Empire State Index up to 4 in October from 2 in the prior month. Economists were looking for a 0.8 reading, according to Econoday.

The Empire State index is closely watched as one of the first indicators of a month’s manufacturing activity. Recent reports have been flat as regional manufacturing has been impacted by the trade war between the United States and China, the sluggish global economy and the strong U.S. Dollar.

US Stock Market Overview – Stocks Slip on Concern over Interpretation of Phase One Agrement

 

Stock prices flip-flopped back and forth between positive and negative territory on Monday as investors absorbed the phase one of the US-Chinese trade agreement. The difference between the initial coverage between the US and China was stark. The Chinese coverage of a trade agreement was not nearly as upbeat. What is important to garner is that nothing was signed which means that it’s still up for interpretation. China agreed to buy more agriculture products from the US, but this was not a concession.

The US will not go forward with the increase in tariffs on around $250 billion of Chinese goods from 25% to 30%, which is largely symbolic. For this deal to really feel like its ready to be signed the Chinese are going to need more and want an agreement that the December tariff hikes will be taken off the table. Trade-in China came in weaker than expected.

Most sectors in the S&P 500 index were lower led down by Materials, while financials were the best performing sector. Apple shares hit a fresh all time high as the company is poised to continue to lift the broader markets. Chinese import and export data were softer than expected which will likely further weigh on global growth.

Trump and Xi Meeting

Trump and Xi are scheduled to meet on the sidelines of the APEC meeting next month, in the middle of November. The mid-December tariff on about $160 billion of Chinese goods, is what is now a key decision for both sides. The Chinese also have a concern that President Trump will pull the plug on an agreement even if he verbally agrees to one. They have accused the US of flip-flopping which is what the US accused China of doing. Those who surround President Xi believe that President Trump could embarrass President Xi, at the APEC meeting, if he changes his mind.

Chinese Trade Data Disappoints

China’s trade data disappointed with imports and exports coming in weaker than expected. The trade surplus widened to $39.65 billion in September from $34.78 billion. Exports were off 3.2% year-over-year after the 1.0% decline in August and forecasts for a 2.8% decline. Pork imports are 44% higher from a year ago, and beef imports are 54% higher, but overall imports contracted 8.5% in September following a 5.6% decline in August. China reported auto sales fell 6.6% year-over-year in September, the 15th decline in the past 16 months.

US MAJOR INDEXES RETEST CRITICAL PRICE CHANNEL RESISTANCE

Still, with the strength of the US economy and the potential that some deal could be reached before the end of 2019 setting positive expectations, the US stock market and major indexes rallied last Thursday and Friday (October 10 and 11).  As the long holiday weekend sets up with no trading on Monday, it will be interesting to see what is potentially resolved between President Trump and the Chinese before the markets start to react on Sunday and Monday nights. Make sure up opt-in to our free market trend signals newsletter.

Our research team wanted to highlight some very key elements related to technical price theory and technical analysis.  These weekly charts highlight what we believe is “key resistance” in the US major indexes and share our research team’s concern that the markets may be reacting to news more than relying on fundamental economic and earnings valuations.  In past articles, we’ve highlighted how a “capital shift” is continuing to take place where foreign capital is actively seeking safety and security for future returns.  This leads to a shift in how capital is being deployed throughout the globe.

The current price channels in these Weekly charts highlight two key facets of the current market setup.  Either the US stock market will attempt to rally above this lower yellow price channel and attempt to regain strength between the two yellow price channels, or it will fail near the current price level and attempt to identify new support somewhere below the current price rotation ranges.

Just a few days ago, we posted this research article to alert traders of the Pennant/Flag formation that is setting up in the US markets …

October 7, 2019: US STOCK MARKETS TRADE SIDEWAYS – WAITING ON NEWS/GUIDANCE

NASDAQ WEEKLY CHART

With the holiday weekend upon us, we believe the news and economic data will continue to drive the market’s future moves and that volatility will continue to increase.

This Weekly ES chart highlights a similar setup, yet one key fact must be understood.  Price has already fallen away from the lower YELLOW price channel level and established a “lower high” price rotation recently.  Any price rally failure near this level may prompt a very big downside move.  The price must continue to rally above 3100 is price makes any attempt at further gains.

CONCLUDING THOUGHTS:

We believe skilled technical traders have already digested and are well aware of the risks that are present in the current market environment.  We’ve been urging our followers to stay mostly in cash and to consider very strategic, expertly timed, investments when price trends are relatively secure.

This is not a speculative market any longer – this is a very volatile and uncertain market that is currently resting as major resistance levels.  Don’t get overly aggressive at this point.  It is better for the markets to tell us what it wants to do.  Lower risk, lower chance of disaster and live to trade another day – these should be hammered into the heads of traders at this stage of the markets.

Our morning coffee video analysis recap is the one thing… that single investment that’s going to turn into the greatest investment you’ve ever made for your trading.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Chris Vermeulen
www.TheTechnicalTraders.com

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Rangebound at Mid-Session on Low Holiday Volume

December E-mini Dow Jones Industrial Average futures are trading nearly flat at the mid-session as investors continue to digest Friday’s U.S.-China partial trade agreement and its significance, given mounting worries over its impact on the economy.

CNBC is reporting through a source that China wants to have additional trade talks before signing what President Donald Trump characterized Friday as a “very substantial phase one deal.” It is not clear if the additional talks will take place in Beijing or Washington, however. Bloomberg News first reported the news.

At 16:05 GMT, December E-mini Dow Jones Industrial Average futures are trading 26795, up 20 or +0.07%. This is down from an earlier high of 26894, and up from an earlier low of 26637.

Volume is well below average because of the U.S. Columbus Day holiday. The Treasury markets are closed as well as many banks. The low volume is affecting the price action by holding the market in a range.

E-mini Dow Jones Industrial Average
Daily December E-mini Dow Jones Industrial Average

Daily Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Friday when buyers took out the 26615 main top. The main trend will change to down on a trade through 25983.

On Monday, the Dow is posting an inside move that tends to indicate investor indecision and impending volatility. The low holiday volume and the confusion over the trade deal are also keeping investors on the sidelines.

The short-term range is 27312 to 25703. Its retracement zone at 26697 to 26508 is support. This zone is also controlling the near-term direction of the Dow.

The major retracement zone support comes in at 26163 to 25892.

Daily Technical Forecast

Based on the early price action and the current price at 26795, the direction of the December E-mini Dow Jones Industrial Average futures contract into the close on Monday is likely to be determined by trader reaction to the short-term Fibonacci level at 26697.

Bullish Scenario

A sustained move over 26697 will indicate the presence of buyers. If big volume happens to return, we could see a surge into the downtrending Gann angle at 26976. Additional targets are minor tops at 27040 and 27112.

Bearish Scenario

A sustained move under 26697 will signal the presence of sellers. The first two targets are a downtrending Gann angle at 26640 and an uptrending Gann angle at 26599.

The latter is a potential trigger point for a break into the short-term 50% level at 26508.

Futures Fall As Uncertainty Grips The Market, Brexit Deal Elusive, China Trade Data Falls

The U.S. Futures Are Down In Early Trading

The U.S. futures are down in early trading despite positive developments on trade. The Dow Jones Industrial Average, NASDAQ Composite, and S&P 500 are all down about -0.55% in early trading. Tech is in the lead. The trade deal, announced on Friday, is an interim stop-gap measure intended to produce a three-phase solution. The first phase includes China increasing its purchases of agricultural products, a pledge the country has made several times in the past. In exchange, the U.S. will postpone or delay tariffs scheduled to take effect later this week.

While both sides have hailed the deal as good there is still no actual document and details are sketchy. China’s Vice Premier Liu He says he will be back to Washington this month to hammer out those details before President Xi will sign any deal. China is expected to purchase up to $50 billion in U.S. agriculture products with those purchases ramping up over the next few weeks. The timeline to end the trade war is now 15 months. Secretary of the Treasury Mnuchin says the October tariffs will go into effect in December if China reneges on its agreements.

In business news, this week begins the peak of 3rd quarter earnings. We are expecting reports from the big banks this week, they are expected to post EPS declines. In economic news, we are expecting several key reads from the Federal Reserve. Also on tap, Retail Sales, the Beige Book, Housing Starts, and the Index of Leading Indicators.

European Indices Are Down With A Case Of Uncertainty

EU indices are down at midday due to a growing case of uncertainty. The trade-deal that is not yet a deal remains a key point of uncertainty as does the Brexit. Brexit negotiators were unable to reach a deal over the weekend raising doubts a solution to the Irish-Backstop can be found. The Queen is expected to deliver her speech to open Parliament today. In it, she will outline the governments plans for Brexit.

The French CAC is leading decliners in early trading with a loss of -0.75% while the DAX and FTSE are both trailing with losses close to -0.50%. In stock news, shares of biopharma company Chr. Hansen rebound 3.8% after last week’s massive selloff.

Asian Markets Rebound Despite Trade Uncertainty

Asian markets are broadly higher after Monday’s session as trade hope fuels optimism. The Shanghai Composite and Korean Kospi both advanced more than 1.1% while the Hong Kong Hang Seng and Australian ASX gained 0.80% and 0.50%. Japan was closed for a holiday. In South Korea chipmakers Samsung and SK Hynix led the advance.

U.S. Stocks Turn Lower as Investors Sour on ‘Phase One’ Trade Deal

The major U.S. stock index futures turned lower for the pre-market session Monday morning and hedgers returned to the Treasury bonds, gold and Japanese Yen after China said it needed to have further discussions before it would sign off on the so-called phase one trade deal President Donald Trump announced on Friday.

The early market price action has the S&P 500 Index opening about 0.42% lower, the Dow off by 95 points or 0.35% and the NASDAQ Composite trading about 0.54% lower.

China Wants More Talks Before Signing ‘Phase One’ Deal

According to a Bloomberg report, China trade officials wanted more talks by the end of October to discuss details of the “phase one” trade deal.

This now has investors wondering if the additional tariffs originally scheduled to start on October 15, and suspended as of Friday, are back on. We’ll probably hear more about this from the Trump administration later in the session.

On Friday, President Trump announced that the first phase of a deal with China had been agreed, though officials on both sides said much more work needed to be done.

However, the deal that does not include many details and Trump has warned it could take up to five weeks to get a pact written. Furthermore, analysts are saying it appears to be more of a “temporary” than a real trade pact.

Investors took no chances upon hearing the news. Besides driving stocks lower and erasing some of Friday’s gains, hedgers drove December Treasury Notes 0.46% higher. December Comex gold futures rose 0.73% and the Japanese Yen jumped 0.24% higher. These protection moves are likely to increase if investors continue to turn sour on the deal.

Asian Markets Up, Europe Down

Shares in Asia rose in reaction to Friday’s partial trade deal news. Investors had no reaction to the Bloomberg report, which came out after the Asian markets had closed.

The major bourses in Europe turned lower after the report was released. According to CNBC, the pan-European Stoxx 600 slipped 1.1% during the morning trade, with basic resource stocks losing 2.6% to lead losses as all sectors traded in negative territory.

The Bloomberg report was not a complete surprise as Citi analysts pointed out in an earlier report.

“Despite what appears to have been achieved in the October talks, we remain cautious on an eventual trade deal,” the analysts wrote in a note. “The US offers are far from what China has been demanding, as showcased in its June State Council White Paper:  reasonable purchases of US imports, removal of existing tariffs, and giving the trade document a balanced treatment.”

In other news, customs data showed that China’s import and export figures were worse than expected in September, with exports falling 3.2% on the year in U.S. dollar terms, while imports declined 8.5%, according to Reuters.

Stocks Rise as Partial Trade Deal Lays Groundwork for Truce on Additional Tariffs

The major U.S. equity indexes rose last week with the rally primarily driven by optimism that U.S. and Chinese trade officials made sufficient progress in negotiations to bring the two economic powerhouses closer to a permanent end to their more than 15-month trade dispute.

At the end of the week, President Trump announced that both sides had agreed to a partial trade deal or phase one of a series of partial trade deals. It wasn’t the ground-breaking news that many investors had hoped for, however, it day lay the groundwork for a truce on additional tariffs.

In the cash market last week, the benchmark S&P 500 Index settled at 2970.27, up 0.6%. It’s up 18.5% for the year. The blue chip Dow Jones Industrial Average finished at 26816.59, up 0.9%. It’s posted a 15.0% gain so far this year. The technology-based NASDAQ Composite closed at 8057.04, up 0.9%. In 2019, it’s up 21.4%.

What’s the Deal with the Partial Deal?

U.S. equities were unpinned at the end of the week after President Trump said China and the U.S. reached the first phase of a substantial trade deal that delays tariff hikes that were to kick in this week.

Late in the session on Friday, Trump told reporters at the Oval Office that phase one of the trade deal will be written over the next three weeks.

As part of this phase, China will purchase between $40 billion and $50 billion in U.S. agricultural products. Trump also said the deal includes agreements on foreign-exchange issues with China. In exchange, the U.S. agreed to hold off on tariff hikes that were set to take effect Tuesday.

Additionally, Treasury Secretary Steven Mnuchin said both sides struck an “almost complete agreement” on currency and financial services issues. Phase two of the deal will “start almost immediately” after the first one is signed, Trump said.

Big Tech, Banks and Chipmakers Liked the News

Despite quite a few calls for caution, at the end of the trading session, the data revealed that Big Tech, Banks and chipmaker investors liked the news. Since stock investors tend to discount future events, they were probably happy because the tariffs that were set to begin on October 15 had been suspended.

The previous tariffs are still in place, but they have been priced into the market. On September 11, President Trump announced that he was delaying plans to impose an additional 5 percent duty on $250 billion worth of Chinese goods on October 15. These tariffs will be suspended with the partial deal in place.

Stocks rose on the news because many investors had sold on September 11 so it’s catch up time for them.

At the end of the session, Facebook, Amazon and Google parent Alphabet were all up at least 0.5%.

Last week’s rapid rise in Treasury yields caused by investors exiting their bond market hedges, made bank stocks more attractive with Bank of America and J.P. Morgan Chase surging more than 1.6% each.

Finally, chipmakers, which had been the center of attention due to tariffs and sanctions against Chinese communication giant Huawei, rose broadly. Among the winners, Micron Technology gained more than 4%, while Xilinx climbed 3.7%.

The Week Ahead – Brexit, Earnings, Stats and the IMF and EU Summit in Focus

On the Macro

For the Dollar:

It’s a busier week ahead on the economic calendar.

NY Empire State Manufacturing figures for October get the week going on Tuesday. The focus will then shift to September retail sales figures due out on Wednesday.

With a heavy reliance on consumer spending, the numbers will need to be in line with forecasts to provide Dollar support.

On a busy Thursday, September building permit and housing start figures are due out along with October’s Philly FED Manufacturing numbers.

September industrial production and the weekly jobless claims figures are also due out.

With no material stats due out on Friday, Wednesday’s retail sales and Thursday’s Philly FED numbers will have the greatest impact.

Outside of the stats, trade war chatter will continue to be a factor, as will any further talk of impeachment.

The Dollar Spot Index ended the week down by 0.55% to $98.301.

For the EUR:

It’s also a relatively quiet week ahead on the economic data front.

Industrial production figures on Monday and German and Eurozone economic sentiment figures on Tuesday will influence early in the week.

The Eurozone’s September inflation and industrial production figures due out on Wednesday will also provide direction.

We would expect finalized inflation figures out of France and Italy to have a muted impact on the EUR, however.

With no material stats due out in the latter part of the week, geopolitical risk will remain in focus.

Any talk of U.S tariffs on EU goods and chatter on Brexit ahead of the 19th October EU Summit will also need considering.

The EUR/USD ended the week up by 0.58% to $1.1042.

For the Pound:

It’s another busy week ahead on the economic calendar.

Key stats include employment figures due out on Tuesday, inflation figures on Wednesday and retail sales numbers on Thursday.

On the data front, claimant counts, inflation and retail sales figures will be the key drivers in the week.

On the Brexit front, there would be more upside for the Pound should Johnson finalize a deal ahead of next weekend’s EU Summit.

The GBP/USD ended the week up by 2.73% to $1.2668.

For the Loonie:

It’s a relatively busy week ahead on the data front.

Key stats include September inflation figures due out on Wednesday and August manufacturing sales numbers due out on Thursday.

On the data front, we would expect the inflation figures to be the key driver in the week.

From elsewhere, trade data, industrial production and 3rd quarter GDP numbers out of China will also influence.

The Loonie ended the week up by 0.83% to C$1.3203 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another relatively quiet week ahead.

Key stats are limited to September’s employment numbers due out on Thursday.

On the monetary policy front, the RBA minutes are due out on Tuesday and could pressure the Aussie Dollar should there be suggestions of more rate cuts to come.

From elsewhere, economic data out of China on Monday and Friday will also influence.

The Aussie Dollar ended the week up by 0.34% to $0.6794.

For the Japanese Yen:

It’s a relatively quiet week ahead on the economic calendar.

Key stats are finalized industrial production figures due out on Tuesday and inflation and trade data on Friday.

We would expect the stats to have a relatively muted impact on the Yen, however.

Geopolitics and economic data out of the U.S and China will likely have the greatest impact in the week.

The Japanese Yen ended the week down by 1.26% to ¥108.29 against the U.S Dollar.

For the Kiwi Dollar:

Stats are on the quieter side in the week ahead.

Economic data is limited to 3rd quarter inflation figures that are due out on Wednesday. We can expect the Kiwi to be particularly sensitive to the numbers.

From elsewhere, stats from China will also influence in the week.

The Kiwi Dollar ended the week up by 0.27% to $0.6337.

Out of China:

It’s a busy week on the economic data front. Economic data includes trade data due out on Monday and inflation figures on Tuesday.

The focus will then shift to a busy Friday. Stats on Friday include fixed asset investment, industrial production and 3rd quarter GDP numbers.

We expect trade data, industrial production, and the GDP numbers to have the greatest impact on market risk sentiment.

The impact of any weak numbers could be buffered, however, by any further positive chatter on trade.

The Yuan ended the week up by 0.83% to CNY7.0892 against the Greenback.

Geo-Politics

Impeachment: With the U.S and China making progress on trade, impeachment chatter could return in the week ahead.

Trade Wars: 15th October U.S tariffs on Chinese goods have been postponed as progress was made last week. For real progress to be made, however, the U.S would need to remove existing tariffs that continue to hurt the Chinese economy. Expect more chatter in the week, which will influence risk sentiment.

UK Politics: Brexit talks continue, with a deal now needed to support further the Pound ahead of the EU Summit. Any suggestions that the latest proposal is inadequate and expect the Pound to slide.

The Rest

Earnings:  It’s a big week ahead, with U.S banks Citi, Goldman, JPMorgan, and Wells Fargo announcing.

EU Summit: It is make or break for Boris Johnson and the Brexiteers. Will there finally be an agreement for the British PM to take back to parliament?

IMF Annual Meeting: Chatter on the global economy and what can be done to drive growth will influence. Will there be any agreements to ramp up fiscal spending to offset the effects of the ongoing U.S – China trade war?

The Weekly Wrap – Progress on Brexit and Trade Delivered in the Week

The Stats

It was a quieter week on the economic calendar in the week ending 11th October.

A total of 44 stats were monitored throughout the week, following 74 stats from the week prior.

Of the 44 stats, 17 came in ahead forecasts, with 22 economic indicators coming up short of forecast. 5 stats were in line with forecasts in the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 25, 20 stats reflected a deterioration from previous.

While the economic data was skewed to the negative, the Dollar struggled in the week, as demand for the dollar eased off the back of positive updates from trade talks and Brexit.

The U.S Dollar Index (“DXY”) fell by 0.55% to end the week at $98.301.

Out of the U.S

It was a relatively quiet week on the economic data front. Wholesale inflation figures on Tuesday and September inflation figures on Thursday provided direction early in the week.

wholesale and consumer prices were on the softer side in September, pinning back the greenback.

On Friday, positive Michigan’s consumer expectations and sentiment figures failed to support the Greenback.

Off less influence in the week, were JOLTs job openings, initial jobless claims and import and export price index figures.

Outside of the stats, the FOMC meeting minutes revealed some debate on when to end the current rate path. Rising concerns over the economic outlook suggested that more cuts could be on the way.

The reality was, however, that just 7 of 17 FOMC members foresaw a further rate cut before the year-end.

Downside for the Dollar ultimately came from an easing in geopolitical risk, with most of the damage coming at the end of the week.

In the equity markets, a Friday rebound pulled the majors into the green for the week. The Dow and S&P500 ended the week up by 0.91% and 0.62% respectively, with the NASDAQ up 0.93%.

Out of the UK

It was a busy week on the economic calendar.

Key stats included GDP, industrial and manufacturing production and trade data on Thursday.

While production was on the slide, quarter-on-quarter GDP numbers continued to show the UK economy dodging a recession. The numbers were ultimately Pound positive.

Of less influence in the week were housing sector figures, labor productivity, and retail sales numbers.

While the stats were supportive of the Pound, the upside ultimately came from Brexit news.

Progress towards a possible trade deal, ahead of next week’s EU Summit, drove demand for the Pound.

The Pound ended the week up by 2.73% to $1.2668.

For the FTSE100, a stronger Pound failed to pressure the 100, with the index rising by 1.28%.

Out of the Eurozone

It was particularly quiet week on the economic data front.

Germany’s factory orders and trade data provided little support in the week, with factory orders falling again and the trade deficit narrowing.

On the positive, however, was an unexpected rise in industrial production.

At the end of the week, finalized September inflation figures out of Germany and Spain had a muted impact on the EUR.

On the monetary policy front, the ECB monetary policy meeting minutes also left the EUR unscathed.

The upside in the week ultimately came from positive updates on Brexit and progress on the U.S – China trade talks.

For the week, the EUR rose by 0.58% to $1.1042.

For the European major indexes, the DAX30 rallied by 4.15%, with the EuroStoxx600 and CAC40 up by 3.23% and 3.00% respectively.

Elsewhere

It was another positive week for the Aussie and Kiwi Dollars.

The Aussie Dollar rose by 0.34% to $0.6794, while the Kiwi Dollar gained 0.27% to $0.6337.

For the Aussie Dollar

It was a quiet week for the Aussie Dollar.

Economic data was limited to September’s business confidence and October consumer sentiment figures.

Both business and consumer confidence figures disappointed in the week, pinning back the Aussie Dollar.

Of less influence were home loan figures that continued to reflect improved housing sector conditions.

In spite of the negative bias on the stats, a Friday rally in the Aussie Dollar delivered the gains for the week. Positive updates on trade talks delivered the upside on the day.

For the Kiwi Dollar

The stats were, once more, skewed to the negative in the week.

September’s Business PMI held steady at 48.4, coming up short of a forecast of 49.0. Electronic card retail sales also came up short of forecasts, whilst up by 0.4% in September.

While the stats were skewed to the negative on Friday, a 0.27% gain on the day gave the Kiwi Dollar the upside for the week.

For the Loonie

Through the 1st half of the week, housing sector figures impressed, proving some support.

Employment figures on Friday were the key driver, however, with the unemployment rate falling from 5.7% to 5.5%. A 53k rise in employment, following an 81.1k increase in August, delivered on the day.

Positive updates from trade talks also delivered provided support late in the week, with WTI and Brent gaining 3.58% and 3.54% respectively.

The Loonie ended the week up by 0.83% to C$1.3203 against the Greenback.

For the Japanese Yen

It was a relatively quiet week on the data front. Stats were limited to August household spending figures that came in worse than forecasts.

While the stats were Yen negative, the downside from the Yen came from an easing in geopolitical risk.

Safe-haven demand waned as progress on Brexit negotiations and trade talks spurred demand for riskier assets.

For the week, the Japanese Yen fell by 1.26% to ¥108.29.

Out of China

It was a quiet week on the economic data front.

September’s service sector PMI, which reported slower sector growth, tested risk sentiment on Monday.

A lack of stats through the remainder of the week left updates from the U.S – China trade talks to influence risk sentiment.

The Yuan rose by 0.83% to CNY7.0892 against the Greenback.

US Stock Market Overview – Stock Surge on “Phase 1”, Trade Deal Announcement

US stock prices surged on Friday as markets continued to hear rumblings about a trade deal between the US and China. President Trump met with Chinese negotiators and announced a substantial phase 1 deal which would pare back some of the tariffs on China. Secretary Mnuchin announced that there would be no tariff increase on October 15, which was more than the markets expected. The markets wanted to see that there was progress. All sectors on the S&P 500 index were higher led by Materials and Industrials, Utilities were the worst-performing sector.

The President announced a substantial phase 1, deal and said that once the deal was written the two parties would begin to work on phase 2. Sectors that have exposure to China were the best performers on the S&P 500 index. The VIX volatility index, which measures implied volatility on the S&P 500 index, tumbled 11% as sentiment improved. Import prices came in higher than expected on Friday and consumer sentiment rose.

Import Prices Rose

Import prices in the US rose in September according to the Labor Department. Import prices increased by 0.2% last month. Expectations were for import prices to remain flat month over month. The import data that was released in August was revised to import prices declined by 0.2% instead of the 0.5% decline previously reported. Oil prices increased by 2.3% buoyed import prices. On a year over year basis import prices decreased 1.6%.

Consumer Sentiment Rose

The University of Michigan reported that consumer sentiment rose to a three-month high of 96 this month from 93.2 in September. Expectations had been for consumer sentiment to climb to a level of 92.5. This comes despite a choppy stock market, and trade tariffs that continue to weigh on global economic growth.

The Fed will By Treasury Bills Through Next Year

The Federal Reserve reported that the central bank would buy short-term Treasury debt beginning next week. The Fed will buy Treasury bills at an initial pace of $60 billion a month and continue those purchases into the second quarter of 2020. The Fed said the actions were technical in nature and were not as a way to address monetary policy.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Bullish News Could Trigger Breakout into 27312

December E-mini Dow Jones Industrial Average futures are hovering near their high for the session late Friday as investors wait to hear from President Donald Trump and Chinese Vice Premier Liu He following their meeting at 18:45 GMT. Traders, who view the meeting as a positive sign, are hoping to hear some encouraging news regarding a trade deal after a series of optimistic comments earlier in the session drove the Dow sharply higher.

At 18:41 GMT, December E-mini Dow Jones Industrial Average futures are trading 26922, up 438 or 1.65%.

Prices could surge further later in the session if the two countries could agree to at least a partial agreement on issues such as currency and agriculture buying. A state-run Chinese newspaper said in an editorial Friday that “a partial deal is a more feasible objective.”

Daily Technical Analysis

The main trend is up according to the daily swing chart. The trend turned to up on a trade through 26615 earlier in the session. The main trend will change to down on a move through 25983.

The short-term range is 27312 to 25703. Its retracement zone at 26697 to 26508 is support. Trading on the strong side of this zone is helping to give the Dow a strong upside bias.

The major support zone is 26163 to 25892. It stopped the selling on Thursday at 25983.

Daily Technical Forecast

Based on the early price action and the current price at 26922, the direction of the December E-mini Dow Jones Industrial Average futures contract into the close is likely to be determined by trader reaction to the downtrending Gann angle at 26992.

Bullish Scenario

A sustained move over 26992 will indicate the presence of buyers. This could trigger a fast rally into the minor top at 27112, followed by a downtrending Gann angle at 27152.

Additional upside targets are the downtrending Gann angle at 27232 and the main top at 27262. These prices are the last two potential resistance levels before the 27312 main top.

Bearish Scenario

A sustained move under 26992 will signal the presence of sellers. This could trigger a steep break into the short-term Fibonacci level at 26697, followed by the short-term 50% level at 26508 and the steep uptrending Gann angle at 26471.

The uptrending Gann angle at 26471 is a potential trigger point for an acceleration to the downside with the next two targets the major 50% level at 26163 and the uptrending Gann angle at 26087.

U.S. Futures Strongly Higher, Hopes For Brexit Deal Stoked , China Announces Financial Reforms

The U.S. Futures Are Ripping Higher

The U.S. equities futures are ripping higher in early trading following positive news regarding trade. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all up more than 1.0% in early Friday trading. The spark that ignited this move is positive news on trade, news that suggests a temporary deal may be reached sometime today. Yesterday, a Tweet from Donald Trump that the talks were going “really well” was compounded today by another source who says the talks went “probably better than expected”.

Chinese Vice Premier Liu He is expected to meet with Donald Trump in the Oval Office later today. During the previous negotiations session, such a meeting preceded important concession from both sides. In stock news, shares of FAANG stocks are up more than 1.0% while the financials are close behind. Investors are also closely watching earnings. Next week the big banks are slated to report and open peak earnings season.

Europe Higher, Brexit Deal In Sight

European markets are also moving higher in early trading. The DAX is up about 2.0% while the CAC trails with a gain of 1.0% and the FTSE lags at 0.60% In Brexit news, Irish PM Leo Varadkar said a deal might be clenched by the deadline after a meeting with UK PM Boris Johnson. The two are trying to work out a solution to the Irish-Backstop, it appears they have hit on a promising possibility. JP Morgan, in the wake of this news, raised their odds of a smooth Brexit from 5% to 50%.

In stock news, tech is in the lead at midday with a gain greater than 3.0%. At the other end of the spectrum, shares of ad-company Publicis are down -13% after cutting full-year guidance. Energy is also a strong performer in the early part of today’s session. Brent and WTI are both up nearly 2.0% after Iran reported one of its tankers was struck by missiles. The tanker was traveling close to Saudi shores, the Saudis have not made a comment but it is possible they are retaliating for damage done last month.

Asian Markets Move Higher

Asian markets closed higher on rising trade hopes. The Hong Kong Hang Seng led the day in Friday’s session with a gain of 2.34%. The move was boosted by a 4.5% increase in CNOOC, China’s national oil company. The Nikkei is in the runner-up position with a gain of 1.15% while most others in the region advanced 0.80% to 0.90%. In China, China’s financial regulator has laid out a timeline reducing and removing requirements for foreign financial institutions.