Can A China Trade Deal Create A Mega Stock Market Rally? – Mike Swanson (04/04/2019)

I’ve been getting lots of questions about the possibility of a big China trade deal creating a monster stock market rally. With the Nasdaq going to a new high for the rally this week more and more people are getting bullish and CNBC and the financial media is talking more about the hope of a big trade deal to make the market go up more in what some are predicting will be a monster rally.

Last week a US team went to China to negotiate and this week the Chinese are in DC. If a deal is going to come its going to come out of this meeting. If not then this issue is going to go on and on for months on end with leaks of potential deals to the press that never happen.

I’m not making bets on the stock market based on whether a deal will happen or not, but if I had to guess it would be that we’ll see a symbolic deal that doesn’t really mean anything much like the North Korea deal last year and then the issue will return in some new form after the 2020 election no matter who wins the election.

So I’m skeptical that a big deal this month is going to be some huge game changer. I talked about this issue and cannabis stocks and mining stocks with Jim Goddard in an interview you can find here:

I think its best to stick with the charts and not to game the news. That said the stock market rally that began the day after Christmas has not broken down yet.

Last month I saw signs that it could be ending as the internals of the stock market faltered much like they did in early September before the final peak of 2018, but this week they firmed up to confirm the rally.

Take a look for instance at the percentage of stocks above their 200-day moving averages on the S&P 500. This indicator did not make a new high when the S&P 500 did for this rally last month, but did so yesterday.

This is my favorite internal indicator and tells me that the rally is not in a position to completely roll over yet. Most likely we’re going to see the market continue to trade like this drifting for several months much like it did last summer to then roll over before the end of the year – especially if the 70% odds of a rate in the Fed Fund futures market before year end are correct.

But that is the future and this is now. And the market has not shown signs of topping out yet with the internals making a new high. Just look for more of the same for now with small pullbacks from time to time and overall churning action with lagging stocks dumping and pockets of strength inside the market.

Personally, instead of trading the major three market averages one way or the other I’m going to be focusing more on individual stocks in my private trading group and will have more to add on this over the weekend with them.

I have been waiting for a dip in gold to come before buying more mining stocks and now that is is playing out I will be buying more this month with new stock picks for the Power Investor group as they line up. Again more on this on Sunday.

If you are not in the group you can get a free trial by grabbing my special giveaway deal for my book Strategic Stock Trading.

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