With the bulk of third-quarter earnings results out, investors’ attention has lately turned back to the U.S. and China’s trade talks. After some optimism around the prospects of a “phase one” trade deal last week, some analysts have flagged concerns that investors could be disappointed by the scope of any agreement.
U.S. stocks were little changed Friday but remained on track to finish the week with gains as investors awaited progress between the U.S. and China on trade. The overall price action remains bullish across all major indices.
The Dow Jones and S&P500 reached all time highs today as Beijing said that both sides had mutually agreed to roll back tariffs as part of a “phase one” trade accord. However, the markets were not able to sustain its bullish momentum into the session close.
Major U.S. stock indexes were little changed Wednesday after notching a string of records in recent sessions fueled by the trade talks optimism. It appears, however, that a lot of investors remain cautious because there have been head fakes in the trade talks before.
The Dow and Nasdaq extended record highs today while the S&P500 fell slightly. What is noteworthy is that the recent break outs on all major indices led to a radical shift in the sentiment among the retail traders. Also, some indicators are still showing bearish divergences.
Fresh optimism over trade drove U.S. stocks to records Monday, extending the market’s recent rally. Major indexes have managed to break out to all-time highs in the past few days after spending much of the late summer and early fall drifting along in a narrow range.
The S&P 500 and Nasdaq closed at new highs Friday after a strong October jobs report reassured investors about the pace of growth. The U.S. economy added 128,000 jobs in October, topping expectations for 75,000 payrolls. The figures suggest the job market remains robust, despite recent labor strikes at GM and the long-simmering trade war between the U.S. and China.
The S&P 500 fell Thursday on skepticism about a U.S.-China trade truce, weakening manufacturing data and possible implications of the US House voting on impeachment inquiry resolution, pulling back from its record close a day earlier.
Both S&P500 and Nasdaq notched the second record close of the week after the Federal Reserve cut interest rates again and signaled its intention to keep rates low. Both indices continued trending higher in after hours after AAPL and FB reported better than expected earning results.
In this market model update, I would like to focus on several bearish divergences that are still present in the market. For the broader markets to continue advancing into the year end and early 2020, these divergences would have to be negated in the coming weeks.