The market continued to run last week and enjoyed its seventh consecutive weekly gain. In the process, the Dow topped 28,000 and the S&P 500 and Nasdaq both hit fresh record highs. On the surface, the big catalyst continues to be optimism on the U.S.-China trade front as many people are now expecting Phase 1 of the deal to get done relatively soon. Beneath the surface, the “real” catalyst is all the easy money being injected into the system from the Fed and other central banks. Take a look at the chart on Page 4 of the the FindLeadingStocks report that shows the Fed balance sheet “expanding” rapidly which many people are calling QE 4. Since the Fed signaled QE4 but they won’t say it’s QE4, stocks have ripped higher. Again, never underestimate the power of the easy money. In the short-term, the market is very extended and due to pull back. The near-term areas of support to watch are the 10 DMA line and then the 50 DMA line.  

Monday-Wednesday’s Action:

Stocks opened lower but ended near their highs for the day as buyers showed and erased a 166 point decline in the Dow. President Donald Trump said Friday he had not agreed to roll back tariffs on China which sent futures lower Sunday night and into Monday morning. Those comments came after the Chinese commerce ministry said that both sides had agreed to cancel existing tariffs in phases. A U.S. official also reportedly said both sides agreed to roll back the tariffs in tranches. On Tuesday, stocks were relatively quiet. The big news came after President Trump ripped into the Federal Reserve again saying he wants negative interest rates. Trump said other countries have negative rates and said, ‘Give me some of that money. On Wednesday, the market ended mixed to mostly higher after shares of Disney jumped by 7%, helping the Dow hit a fresh record high. In other news, Jay Powell spent the morning talking about the logic behind the Fed’s policy.

Thursday & Friday Action:

On Thursday, the market was very quiet as investors digested the latest round of economic data. Shares of Wal-Mart opened higher but closed lower after the retail giant reported earnings. Elsewhere, shares of Cisco Systems tanked by over -7% after reporting disappointing guidance. Stocks jumped nicely on Friday after President Trump’s economic advisor, Larry Kudlow, said a U.S.-China trade deal is “getting close.”

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.