US indices back near 2019 highs

Summary:

• Further gains seen in US stocks ahead of cash open

• Risk-on sentiment apparent with US-China trade hopes

• US500 back up near 2019 high and 200 day SMA

It’s shaping up to be a good week for stocks so far, with gains seen in all the major benchmarks. The declines seen at the tail end of last week have now been recouped to a fair extent and the US markets in particular are faring well. There’s a couple of reasons behind the rise across the Atlantic with news that US lawmakers have agreed on a deal that will postpone a government shutdown for 6 months and also raised hopes of a further de-escalation in the US and Chinese trade tensions.

The US500 has rallied fairly strongly since last night’s closing bell, with price now back around 10 points from the year-to-date peak of 2737. Source: xStation

There’s some market chatter doing the rounds that the US will extend the deadline for a trade deal with China beyond March 1st. The world’s two largest economies are locked in the second day of trade talks, with these discussions seen as paving the way for top-levels talks on Thursday and Friday involving US trade representative Robert Lighthizer, US Treasury Secretary Steve Mnuchin and Chinese Vice-Premier Liu He. If a deal is not agreed, or the deadline extended beyond 1st March, the US has said that it will raise tariffs on $200B of Chinese goods from 10% to 25%.

With the US500 back up near its 2019 highs, the market is around 18% higher than the low of 2318 seen over Christmas. This V-shaped recovery has no doubt been strong but while shorter term trend identifiers have turned positive, price remains below the 200 day SMA. This metric is currently at 2746 and the rough confluence of that level with the recent highs of 2737 could be seen to represent significant resistance. Any reversals in the region from here up to 2746 could be seen to provide attractive shorting opportunities, but a clean move above the 200 day SMA would open up the possibility of another leg higher towards 2824. The 2676 level that price broke above following last month’s Fed meeting remains potentially key support, with a move below there opening up the chance of a deeper decline to 2612 or possibly even further.

The S&P500 has enjoyed an impressive rally of around 18% this year, but despite this the market remains below its 200 day SMA. Source: xStation