-- This Week In The Money --

Analysis, Perspective, Trading Strategy

If China News Remains Good the Market Could Still Move Higher

Editor Joe Duarte in the Money Options

The stock market just got a shot of adrenaline as the news that the Federal Reserve won’t be raising interest rates until 2021 along with the news that a “deal” with China was being completed was likely good enough to send stocks higher for the next two to three weeks barring something extraordinary. Of course, things could change rapidly if the positive news turns sour.

Last week in this space, I wrote: “ nothing would surprise me at this point, even a U.S. China trade deal being announced at some point before the open of U.S. trading on December 16 – maybe late Friday afternoon or early Sunday night - just in time to juice stocks higher before the end of the year. Certainly I have no inside information on the trade deal, and surely I wouldn’t double mortgage my house to bet on it, but given the way the White House works and how one of my favorite indicators, my gut, feels at the moment, I can’t help but suspect that something dramatic is brewing.”

Thus, I was not surprised when the news hit on Wednesday early in the day that the Phase 1 deal was coming, a fact that was confirmed later in the day and stocks took off. Of course, the market has now talked itself into the next potential crisis, some type of repo market induced liquidity meltdown, even as the Fed has made it clear that the printing presses are on for the foreseeable future.

What it all boils down to is that the Markets, Economy, Life (MEL) complex adaptive ecosystem just got what could be a shot of adrenaline, which when combined with an ever-rising wall of worry should keep the bulls in control for a bit longer unless the market gets a dose of sell the fact now that the phase I deal seems to be closing to be on the book.

By the way, I will be at the Orlando Money Show in February 2020 to discuss “Trading at the Edge of Chaos” and how to use it to find the best investing and trading opportunities for 2020. For information on how to register and details on the presentation go HERE.

Archer Daniels Midland Could Surprise if Trade Deal Blossoms

Shares of Archer Daniels Midland (NYSE: ADM) delivered a quiet breakout on December 13 on healthy volume as the news of the U.S.-China Phase 1 deal broke. But the breakout, aside from possibly signaling higher prices ahead for ADM, may be a confirmation of sorts that the grain agricultural purchases section of the agreement may deliver significant pluses for the U.S. farming sector.

 

 

Certainly, ADM is a volatile stock, and the recent gains could well unravel if the deal goes south. Nevertheless, the chart pattern is encouraging especially given the volume on up days and the rising On Balance Volume (OBV) and Accumulation Distribution indicating increasing money flows into the stock.

Bottom line from a trading standpoint is that ADM has huge potential as long as the talk on the Phase 1 deal agricultural section remains happy.

Market Breadth Makes New Highs Again

The market’s trend remains to the upside as once again the New York Stock Exchange Advance Decline line (NYAD), the most accurate indicator of the market’s trend since the 2016 presidential election has made at least one new high last week while trading well above its 50-day moving average. When these two technical events are in play the market usually continues in rally mode.

 

 

The S & P 500 made new highs last week but closed well off of them, a sign that the market may be a bit tired in the short term

 

 

On the other hand, the Nasdaq 100 managed to hold on to its new highs better closing the week on a fairly strong note.

 

 

Finally, the U.S. Ten Year note remained below 1.9% at week’s end which is a positive for the housing stocks.

 

 

For now it’s still all About the U.S.-China Deal

The U.S.-China trade deal will likely remain the catalyst for the market’s trend for the rest of 2019. Thus from a trading standpoint, until proven otherwise, it makes sense to keep fully engaged on the news regarding the deal and the general trend of sectors and companies who may benefit from this. At this point technology and agricultural stocks seem to be in the leadership position related to potential benefits.

This is not a situation without risk. In fact, things could unravel rapidly on negative headlines. Trade accordingly.

I own ADM as of this writing.

Joe Duarte is a former money manager, an active trader and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best sellingTrading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com - now in its third edition, The Everything Investing in your 20s and 30s and six other trading books.

Meanwhile, the U.S. Ten Year note yield (TNX) is trading in a The Everything Investing in your 20s & 30s at Amazon and The Everything Investing in your 20s & 30s at Barnes and Noble.

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