Asian stocks were under renewed selling pressure this morning as global trade concerns and chaos across emerging markets weighed on risk appetite. Global trade developments have certainly placed investors on an emotional roller-coaster ride this week with the initial optimism over NAFTA talks outweighed by U.S.-China concerns. Market sentiment is likely to remain cautious, especially after President Donald Trump threatened to withdraw the United States from the World Trade Organisation.
We could not have been more Bullish on this rally. in the S&P 500. Furthermore, our upside target of 2924.50 may not have been perfectly achieved for those who are greedy but hitting within 7 points is a win in our book. Yesterday’s PCE data showed that inflation stabilized back at 2.0% for the month of July.
Markets traditionally kick back into high gear after Labor Day, but one should not underestimate this last week of August. Trade talks remain at the forefront and last week’s newest round between the United States and China failed to yield true substance. However, the purpose was to delay the imminence of the third wave of tariffs in which the White House would impose $200 billion on Chinese goods; this, in our opinion, would be the official start of a trade war.
A strong close Friday confirmed that the Federal Reserve is still in the driver’s seat. The major takeaways from last week’s FOMC Minutes and Fed Chair Powell’s speech are that there are no signs inflation will run away, real rates have stayed suppressed and as long as uncertainties in international trade persist, the Fed will remain accommodative; this is a potent recipe for higher prices.
The S&P 500 traded perfectly down to major three-star support on Friday and stabilized. As beautiful as the technicals were, (discussed in the ‘Technical’ section below) the bounce from major three-star support caught a tailwind from positive news on U.S.-China trade talks. It was reported that they are paving a path to resolve the trade dispute by November.
The coming week of Aug. 24, 2018, sets up trending pivot math in the Japanese yen, a potential rangebound pivot breakout higher in soybeans, and bulls entering many markets. The S&P 500 appears near highs for next week, but the monthly Camarilla pivot at the 2,867 level seems to make sense to me, so I projected next week’s new high at 2,865 or higher.
A sense of relief was felt across financial markets following the news that Beijing will resume trade talks with Washington next week. Although the chances of a breakthrough deal from lower-level talks are seen as unlikely, the meeting could be a positive step towards easing trade tensions between the world’s two largest economies.
In our regular gold trading alerts, we focus on the short- and medium-term outlook and we rarely discuss the very long-term issues or price targets. The reason is simple – the long-term issues and price targets don’t change often, so usually, there’s little new to say about them. Consequently, it’s been a long time since we last discussed our view on gold’s explosive upside potential. In fact, it’s been so long that those who do not take the time to read our analyses thoroughly and those who have been reading them for only a short while may think that we are bearish on gold in the long run. Or that we’re perma-bears.