The market opened the week lower but reversed and closed sharply higher after China said it was open to a partial trade deal. Last week, I noted that it was “healthy” to see the major indices defend their respective 50 DMA lines. Then, in Thursday’s pre-market update, I had a whole section titled, “Read The Tape- Objectively” where I outlined the bullish case for stocks. The market ripped higher over the next 48 hours and is once again within or two “good” days from hitting fresh record highs. Looking forward, the 50 DMA line is near-term support and the record high is near-term resistance. The market continues acting well and the next “big” thing will be earnings season over the next few weeks. 

Monday-Wednesday’s Action:

Stocks fell on Monday as investors were concerned about the US-China trade deal. Remember, in early October, the Institute for Supply Management said U.S. manufacturing activity tanked to the lowest level in a decade and the services sector grew at its slowest pace in more than three years. That 1-2 punch of weaker than expected U.S. economic data sent stocks lower in the short-term but it also set that stage for the U.S. to be open to a partial trade deal which happened later in the week. Stocks fell over 300 points on Tuesday after the U.S. expanded its trade blacklist to include some of China’s top artificial intelligence firms. China’s foreign ministry said to “stay tuned” for retaliation following the blacklist expansion. Stocks rallied nicely on Wednesday after China said it was open to a partial trade deal. 

Thursday & Friday Action:

On Thursday, stocks rallied after both sides hinted they would be open to a partial trade deal. President Trump said he would meet with Chinese Vice Premier Liu He on Friday which suggested the two countries were making progress. On Friday, the market soared over 500 points after Trump said the U.S. has a substantial phase one deal with China. The market gave back some of the gains after Trump said there will be multiple phases for the deal but the market still ended higher for the day and week. 

Market Outlook: Easy Money Is Back

Once again, global central banks are back on the easy money bandwagon after the Fed and the ECB both announced more easy money measures directly aimed at stimulating global markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. Earlier this year, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Separately, the trade talks are moving in the right direction which is another positive. As always, keep your losses small and never argue with the tape.