US Stocks Rebounded Sharply Last Week

Last week we mentioned a few fundamental and technical reasons for a rebound of the US stocks, describing two long trades on the S&P500 and the Nasdaq indexes. That was a great call indeed as the US stock market made a great come back with the DJIA gaining 5.2% at 25538, the SP500 closing at 2760, a +4.8% on the previous week’s close, and the Nasdaq gained 5.6% closing at 7331.

Besides the general fundamental reasons we described last week, the rally was boosted by Fed Chairman Powell's reference to interest rates being close to neutral, contradicting his previous comments and suggesting a slowdown in interest rate hikes in future FOMC meetings.

A further, sizable boost to the upward movement was provided by the news coming from the G20 summit in Argentina, held over the weekend, during which the US administration announced that for the next 90 days, no new tariffs will be levied on 200 billion dollars' worth of Chinese products. These tariffs were previously set to come into effect on the 1st of January, 2019. The possible easing of tensions regarding the trade dispute between the US and China added to the positive climate, even if the suspension does not necessarily imply a solution to the dispute, and the US stock indexes, as well as stock indexes in other areas, opened with a huge gap to the upside.

As you might remember, last week we opened two long trades on S&P500 and Nasdaq, indicating the first targets on which we would close half a position and then trail the rest. As expected, the first target was reached within the subsequent day and half of the position was closed, raising the stop loss to break even for both trades. Thereafter, we have been managing the trades, posting real time updates on Twitter and executing the strategy live during our seminars and client sessions in Lagos and Abuja.

We did the last update on Monday, the 3rd of December, after the big gap up we mentioned before. Besides the high probability that such a gap could be closed in a relatively short time (again, the tariff suspension is good news, but nothing final), we are witnessing a yield curve inversion after more than a decade on US bonds, and that is bad news, as such an occurrence has anticipated a recession in the past. Therefore, we moved the stops and tweeted in real time:

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Disclaimer: Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial ...

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