News, again, drives the US stock market and major indexes higher as optimism of a US/China trade agreement floods the news wires. As we’ve been suggesting, the global markets continue to be news-driven and are seeking any positive news related to easing trade tensions and capital markets. We believe any US/China trade deal would be received as very positive news by the global capital markets – yet we understand the process of achieving the components of the “deal” would likely still be 6 to 24 months away.
Still, with the strength of the US economy and the potential that some deal could be reached before the end of 2019 setting positive expectations, the US stock market and major indexes rallied last Thursday and Friday (October 10 and 11). As the long holiday weekend sets up with no trading on Monday, it will be interesting to see what is potentially resolved between President Trump and the Chinese before the markets start to react on Sunday and Monday nights. Make sure up opt-in to our free market trend signals newsletter.
Our research team wanted to highlight some very key elements related to technical price theory and technical analysis. These weekly charts highlight what we believe is “key resistance” in the US major indexes and share our research team’s concern that the markets may be reacting to news more than relying on fundamental economic and earnings valuations. In past articles, we’ve highlighted how a “capital shift” is continuing to take place where foreign capital is actively seeking safety and security for future returns. This leads to a shift in how capital is being deployed throughout the globe.
The current price channels in these Weekly charts highlight two key facets of the current market setup. Either the US stock market will attempt to rally above this lower yellow price channel and attempt to regain strength between the two yellow price channels, or it will fail near the current price level and attempt to identify new support somewhere below the current price rotation ranges.
Just a few days ago, we posted this research article to alert traders of the Pennant/Flag formation that is setting up in the US markets …
October 7, 2019: US STOCK MARKETS TRADE SIDEWAYS – WAITING ON NEWS/GUIDANCE
Nasdaq Weekly Chart
With the holiday weekend upon us, we believe the news and economic data will continue to drive the market’s future moves and that volatility will continue to increase.
This Weekly ES chart highlights a similar setup, yet one key fact must be understood. Price has already fallen away from the lower YELLOW price channel level and established a “lower high” price rotation recently. Any price rally failure near this level may prompt a very big downside move. The price must continue to rally above 3100 is price makes any attempt at further gains.
CONCLUDING THOUGHTS:
We believe skilled technical traders have already digested and are well aware of the risks that are present in the current market environment. We’ve been urging our followers to stay mostly in cash and to consider very strategic, expertly timed, investments when price trends are relatively secure.
This is not a speculative market any longer – this is a very volatile and uncertain market that is currently resting as major resistance levels. Don’t get overly aggressive at this point. It is better for the markets to tell us what it wants to do. Lower risk, lower chance of disaster and live to trade another day – these should be hammered into the heads of traders at this stage of the markets.
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