S&P 500 Probing 4-Month High Above 2800 on US-China Trade Optimism
Matt Weller, CFA, CMT February 25, 2019 5:09 PM
After two weeks of constructive trade talks on both sides of the Pacific, we suggested that traders were “expecting the increase in tariffs will be delayed…with some sort of agreement following in either late March or early April.” On Sunday night, President Trump confirmed that he would be delaying the tariff escalation and planning another summit between President Xi and himself (date TBD).
Some analysts have noted that the US and China still have significant differences on structural issues including intellectual property rights and technology transfers, but ultimately, both sides apparently want to make a deal. President Xi is eager to address China’s economic slowdown in any way possible, while Trump needs a quick win after his “shrewd dealmaker” reputation took a hit around the prolonged government shutdown and failure to secure funding for a border wall.
Much like the USMCA, which is merely a rehash of NAFTA with a few small tweaks around the edges, Trump may be keen to strike a US-China deal that he can pitch as a breakthrough, even if it doesn’t fully address some of the thornier issues.
Traders have adopted this optimistic outlook, driving the S&P 500 up to test its 4-month high. After breaking through its (slight) descending trend line, the index is testing its 78.6% Fibonacci retracement in the 2815 area. After rising eight of the last nine weeks, the S&P 500 could take a bit of a breather here. That said, if the index can break conclusively above 2815, there’s little stopping bulls from making another run at the record highs near 2940.
Source: TradingView, FOREX.com
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.