US markets search for direction as trade deficit improves

Summary:

  • US stocks continue to seek clear direction

  • Trade deficit narrows by the most in almost a year

  • USFANG back near key resistance hugging 200 SMA

 

Tuesday’s US session saw solid gains for the stock markets, but they did pull back from their highs into the cash close in a further sign that they are still searching for a clear direction. Following Friday’s swoon, the S&P500 appears to have regained some of its poise but it still remains susceptible to another flush lower. The recent lows of 2790 are an obvious place to keep an eye on should price push lower once more whereas a move above 2865 would open up the possibility of a retest of the record peak at 2947.

The S&P500 is back above the 8 EMA after price dipped below the 21 EMA for only the second time in over 2 months at the start of the week. These EMAs remain in a positive orientation but have converged of late and while the uptrend is still intact a drop below 2790 could be seen  put an end to it. Source: xStation

 

The main economic release of the afternoon will be warmly welcomed by President Trump, with the latest figures showing the US trade deficit dropping sharply to $51.2B. This represents a decline of almost 15% from the prior $57B and is the sharpest drop since March 2018. Compared to an expected $57B this is quite a beat and comes about thanks in no small part to a rise in exports of $1.9B to $207B while imports declined by $6.8B to $258.5B. China in particular accounts for a decent amount of the reduction with the deficit here decreasing by $5.5B to $33.2B.

 

Another development that could be worth keeping an eye on is the increasing possibility of Stephen Moore being elected onto the Federal Reserve Board Board of Governors. Moore is believed to be favoured by trump to join the rate-setting committee and remarks that he would cut the central bank rates by half a percentage point have caused a bit of a stir. The comments come from a New York Times interview in which Moore also said he is not a “dove” or a “sycophant” for Trump, but there is a general feeling the president would like to place him on the committee to apply pressure for lower rates.     

USFANG is back at a potentially pivotal level with price retesting prior resistance around 2707 and also oscillating around the 200 SMA. Source: xStation    

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