Weekly Recap & Upcoming Market Movers – 5th November 2018

Last Week Recap

Last week the global stock market staged a remarkable rebound as news of the US and China coming to a trade agreement helped to lift sentiments. US President Donald Trump has asked his key officials to start drafting potential terms to reach a trade agreement with China. President Trump tweeted that he and China President Xi Jinping had a “long and very good conversation”, they discussed on “many subjects, with a heavy emphasis on trade”.

The S&P 500, Dow Jones and the Nasdaq composite all posted solid gains of more than 2% for the week. As mentioned in our post last week, volatility is now a norm in the markets. The S&P 500 fell on Monday and then rallied more than 1% for the next 3 days consecutively. With the US economy posting healthy figures last week, we still believe this bull has legs to run and we believe every dip is a buying opportunity for both short-term trend trading and longer term investing.

German Chancellor Angela Merkel announced that she will be retiring from politics in 2021 after a poor result for her CDU party in a regional election. The Euporean markets weren’t too concern as the German Dax was still up more than 2% when news of her retirement broke last Monday.

 

 

On the technical front, the Dow Jones is still supported at 24400 region as price failed to close below it last week. With the increased volatility we can expect the trading range to be bigger. A close above 25800 will signal the bulls are back in control while a close below 24400 is bearish.

This Week Ahead

The highlight for this week would definitely be the US midterm elections that will be held on Tuesday. Though the importance of midterm elections are not as significant as general elections, it can still potentially cause some headaches for President Trump. Should the Democrats win a House majority, they would be able to interfere with the Trump administration’s policies and programs making decisions and they could also start impeachment proceedings against President Trump. This outcome might most probably bring uncertainty to the markets and volatility will take over.

The US Federal Reserve will hold its November meeting and announce the rate decision this Thursday. The Fed is not expected to hike rates at this meeting but with the increasing inflation, rising wages and a strong US economy, the odds of Fed raising rates in December is getting increasingly higher. Based on CME FedWatch Tool, the current odds of the December rate hike is 72.8%.

Other Notable Economic Data 

Monday – US ISM Non-Manufacturing PMI

Tuesday – Australia RBA Rate Decision

Thursday – New Zealand Rate Decision

Friday – China CPI, UK GDP, US PPI

Vincent Foo

Vincent was an ex-proprietary trader and now is a full-time trader at a family fund. He trades the futures market and specializes in bonds and commodities.

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