Dow Jones Industrial Average (.DJI), S&P 500 close at record highs after Trump signs first phase of U.S.-China trade pact

Dow Jones Industrial Average (.DJI), S&P 500 close at record highs after Trump signs first phase of U.S.-China trade pact

Dow Jones Industrial Average (.DJI), S&P 500 close at record highs after Trump signs first phase of U.S.-China trade pact

U.S. stock indexes closed higher Wednesday afternoon, though the major benchmarks ended the day well off session highs, after President Donald Trump signed the first phase of a trade pact with China, marking a truce in the dispute over import tariffs which has unsettled markets world-wide and slowed economic growth.

All three major benchmarks set record intraday highs, while the Dow and S&P 500 ended the session at record closing levels.

At session highs on Wednesday, the Dow was up 187.92 points, or 0.6%, the S&P 500 had gained 15.51 points, or 0.5% and the Nasdaq Composite was up 47.49 points, or 0.5%.

What drove the market?

Trump and Chinese Vice Premier Liu He signed a long-awaited preliminary trade pact in the East Room of the White House White House Wednesday and investors were heartened by some of the details of the deal released by the Trump administration.

The text of the deal includes promises by the Chinese to increase their purchases of U.S. agricultural, manufacturing, and energy products, along with purchases of services, by more than $200 billion over the next two years, though it also states that “the parties acknowledge that purchases will be made at market prices based on commercial considerations.”

It also includes commitments by the Chinese to enforce intellectual property theft laws and a “bilateral evaluation and dispute resolution arrangement” that will encourage the U.S. and China to work jointly to resolves allegations of patent and copyright infringement or intellectual property theft.

During the singing ceremony, President Trump said it was “a great deal for both countries” and China’s Liu He called the pact a “landmark agreement.”

Investors and analysts said that the deal was more substantial than many critics of the trade negotiations had expected, with the magnitude of promised Chinese imports of U.S. goods larger than many had anticipated.

“I think what’s happening is that people are recognizing that, while there’s a lot of room to go with additional discussions with China, what is happening today is a real positive step,” Wayne Wicker, CIO of Vantagepoint Investment Advisers told MarketWatch.

Stocks did end the day, however, off their peaks, and Randy Frederick, vice president of trading and derivatives with the Schwab Center for Financial Research, called this action “classic ‘buy the rumor, sell the news,’ activity,” referring to the tendency for stock investors to bid up stock prices in the anticipation of good news and take profits when it comes to fruition.

“This market has been in a robust up trend, really since Oct. 11, the day Trump first announced a deal with China,” he added. “In this environment, with markets at record highs, it’s not surprising we’d see some caution.”

Investors were also watching as U.S. fourth-quarter corporate results continue to roll in, with earnings so far coming in better than feared. “Less than 10% of the S&P 500 has reported, but so far 77% of companies have exceed earnings estimates, which is a little better than the historical average,” said Michael Arone, chief investment strategist at State Street Global Advisors.

“The expectations bar has been lowered so much that it doesn’t take a significant amount of effort for companies to overstep it,” he added.

In economic data, U.S. wholesale inflation rose 0.1% in December, according to the Labor Department’s producer-price index, below the 0.2% rise expected by economists, according to a MarketWatch poll. Year over year, producer prices rose just 1.3%, roughly half the rate in 2018.

A survey of manufacturing activity in New York state rose 1.5 points to 4.8 in January, above expectations of 3.6, according to Econoday.

A survey of business conditions in various Federal Reserve districts, known as the “Beige Book,” was released Wednesday afternoon, and indicated economic activity expanded “modestly” during the final six weeks of 2019 and the labor market remained tight with businesses reporting difficulty finding workers, although there were job cuts in the manufacturing, transportation and energy sectors.

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 28,855.47.

The projected upper bound is: 29,181.98.

The projected lower bound is: 28,895.33.

The projected closing price is: 29,038.66.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 40.4527. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 57.33. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 36 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 21. This is not a topping or bottoming area. The last signal was a sell 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.

Rex Takasugi – TD Profile

DJ INDU AVERG closed down -0.129 at 29,030.221. Volume was 49% above average (neutral) and Bollinger Bands were 19% narrower than normal.

Open     High      Low     Close     Volume___
29,035.71129,035.71129,030.22129,030.221 47,304,260
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 29,033.80 28,898.45 28,516.07
Volatility: 3 3 3
Volume: 36,347,044 33,866,936 31,519,904

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

DJ INDU AVERG is currently 1.8% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .DJI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .DJI and have had this outlook for the last 6 periods.

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