Tue, Mar 21, 2023 @ 01:08 GMT
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S&P 500: Buy the Rumor, Sell the News on a US-China Trade Deal?

Despite a busy economic calendar in the US this week, including yesterday’s decent ISM Non-Manufacturing report, today’s ADP employment report, and Friday’s always impactful Non-Farm Payrolls release, US-China trade developments remain the dominant driver for US stocks.

Just as we saw with the negotiations around NAFTA and South Korea, President Trump appears more interested in signing a deal that he can pitch as a “win” than forcing China into contentious structural reforms. A Bloomberg report from earlier today supports this view, with sources indicating that the President is pressuring negotiators to make a deal with China “as soon as this month” because he’s “increasingly concerned that the lack of an agreement could drag down stocks.”

In other words, the market tail is once again wagging the policy dog.

Given the S&P 500’s massive 20% rise of the Boxing Day low, it’s clear that the market has started to price in an agreement already, setting the stage for a potential “buy the rumor, sell the news” result if and when the two global heavyweights agree to a deal.

In the short term, traders will be watching Monday’s range for near-term direction. A break above the 78.6% Fibonacci retracement of the Q4 2018 drop at 2813 could open the door for a move up toward the upper-2800s, while a break below rising channel support could expose the early February low near 2700 next. With both the RSI and MACD indicators starting to roll over, weak economic data could be the catalyst for a breakdown in US stocks.

DISCLAIMER: 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 of sale of any currency. 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. 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.

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