The Russell closed 10 points under critical resistance and well below recent highs. When a trade agreement is announced it could be a sell the news event. With several levels of critical resistance ahead the Russell has a rough road ahead.
The China news catapulted the indexes to 5-month highs but there is a test ahead. The equity markets are up 16% or more for the year and approaching the record highs set last October. Stocks are not running on earnings excitement but on expectations for a trade agreement. When that agreement is announced there is a very good chance the markets will gap higher and if they are not already at the prior highs, they should go there on the announcement of a visit by President Xi. That will be a very strong test of market sentiment. How long will the excitement hold and what will be the gains? Once that hurdle is past, the focus will turn to earnings and that is not a pretty picture at this point. Immediately after earnings we head into the summer doldrum period. The post announcement resistance test will be critical for market direction after earnings. Do we fail at the prior highs or begin a new leg higher over the summer when the market are already up 20% for the year? (anticipated post announcement level)
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