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Trade Wars in Focus

U.S. Stocks Rally On Trade Hopes

Posted Monday, November 25, 2019 by
Shain Vernier • 2 min read

It has been a bullish open to the week on Wall Street. Stocks are up, safe-havens are down, and U.S./China trade optimism is dominating early sentiment. At the half-way point of the U.S. session, the DJIA DOW (+139), S&P 500 SPX (+19), and NASDAQ (+101) are all deep into the green.

Today’s American economic calendar has been relatively bare, featuring no primary market drivers. However, the lack of news items has encouraged equities bulls. Subsequently, President Trump has taken to Twitter, lauding the lofty valuations of U.S. stocks:

“Another new Stock Market Record. Enjoy!”

In a surprise move, institutional traders are taking a break from snatching up U.S. debt obligations. Short-term bond yields are up, breaking the recent trend:

Event                                                     Actual     Previous

3-Month Bill Auction                           1.56%           1.54% 

6-Month Bill Auction                            1.58%          1.54%

For the first time in several weeks, the 3 and 6-month T-bills have shown increasing yields. This is key, as it suggests that “risk-on” may be the narrative as 2019 draws to a close.

Pre-Holiday Bullish Action For U.S. Stocks

With the Thanksgiving holiday rapidly approaching, it looks like those bullish on U.S. stocks are betting big that the markets are headed higher. Below is a look at the December E-mini S&P 500 as of last Friday’s close.

December E-mini S&P 500 Futures (ES), Weekly Chart
December E-mini S&P 500 Futures (ES), Weekly Chart

Overview: For the time being, 3100.00 is a key level for the December E-mini S&P 500. This area has drawn heavy two-way action and will likely be either a reversal or launch point for a forthcoming directional move in pricing.

From a practical standpoint, liquidity is likely to dry up as this week progresses. As the Thanksgiving holiday approaches, more and more U.S. institutional traders will be taking leave of the office. If you are an active equities player, be sure to keep one eye on the news feed and another on order flow. When traded volumes drop off, it will pay to limit risk as liquidity decreases.

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