Trade War Back On Front Burner

Posted Monday, October 7, 2019 by
Shain Vernier • 2 min read

The U.S./China trade war is back on the front burner as negotiations are scheduled for this week in Washington D.C. Reports are surfacing that suggest China has taken industrial reform and government subsidies off the table, narrowing the scope of the talks. Thus far, U.S. stocks are showing weakness. On the opening bell, the DJIA DOW (-113), S&P 500 SPX (-13), and NASDAQ(-32) kicked off the week in the red.

One reason that the trade war is looming large is a lack of economic events scheduled for today. Aside from FED Chair Jerome Powell issuing public comments at 1:00 PM EST, the U.S. economic calendar is wide open. It looks like breaking news items related to the U.S./China trade war are going to dominate early week sentiment.

Trade War Plays, U.S. Indices Pull Back On The Open

Last Thursday and Friday brought some positive price action to the DJIA. Accordingly, the December E-mini DOW tested an area of topside resistance and failed to drive higher.

Trade War DJIA
December E-Mini DOW Futures (YM), Daily Chart

In a Live Market Update from Friday, I issued a short trade recommendation for the December E-mini DOW. The play turned out to be a success, generating 35 ticks profit on a rejection of the 62% Fibonacci resistance level (26529). 

Here are two levels to watch for the remainder of the session:

  • Resistance(1): 62% Last Week’s Range, 26529
  • Support(1): 38% Last Week’s Range, 26214

Overview: The quiet early week U.S. economic calendar is going to place an added emphasis on U.S./China trade war negotiations. While nothing is likely to come from the talks, related news items are certain to drive action to the equities and safe-haven markets. If you are going to be trading the U.S. indices over the next 48 hours, it will pay to keep a close eye on breaking news and Trump’s Twitter feed.

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