Talk about Déjà vu all over again!
I wrote a similar article back in mid-July when the S&P first made new highs at 3,000. The other striking similarity was that we were also enjoying a rally thanks to the many olive branches extended between the US and China on the trade front.
Unfortunately as the calendar flipped to August, so too did the tenor of the trade discourse. A fresh round of tariffs were fired off by both sides and the market retreated to 2822 in just a few painful sessions.
Once again we need to contemplate the next steps for stocks. Will we get a green flag waving us up to new highs at 3100 or will red flags return on China trade having us fall back to 2900 (or below)?
Let’s discuss the possibility of each scenario along with the best trading strategy.
Rally Up to 3100
If we get a trade deal resolved with China after the October meetings, then 3100 is a near certainty within a week of the deal being inked. The greater question is whether stocks can press up to that level as we await the next round of negotiations.
My gut says that’s possible…but not probable. I suspect we will take out the previous high of 3022. Maybe push up to 3050. Then I expect investors to press pause awaiting the outcome from these important trade talks.
The point is that it’s not about the Fed this coming Wednesday. Nor the next slate of economic data. The movement of stocks right now is nearly 100% tied to the outcome of China trade…and how that changes the risk of recession.
Drop Down to 2900
Just like in July, stocks will likely stay at or above 3,000 til we get word on the October round of talks. There is very little risk of falling back down to 2900 before we get the verdict.
So if history repeats itself, and they walk away from those meetings with a new round of nasty Tweets and headlines…then stocks will be at 2900 very quickly. And quite likely taking a shot at the August low of 2822.
Once again, it doesn’t matter about the Fed…or economic data…or even upcoming October earnings reports. The next move for the market hinges on the outcome of these trade talks.
As we await the outcome of the trade talks the S&P might drift higher by 1-2%. Gladly there are places to find some outperformance. And I discuss that and more this coming Tuesday 9/17 when we launch the free investment webinar series: Reitmeister’s Strategy Session.
At this live event I will cover topics like:
- Updated market outlook
- Trading Strategy: Like what stock groups are ready to outperform.
- How to prepare for the trade deal to fall apart and stocks tumble once again.
- Q&A: Your questions…my answers.
- Stock of the Week
- And more…
These free webinars are the best way to share investment insights with you. That’s why I hope you’ll join me this coming Tuesday. Unfortunately space is limited. So claim your spot now!
Wishing you a world of investment success!
…but my friends call me Reity (pronounced “Righty”)
CEO, Stock News Network
SPY shares fell $0.12 (-0.04%) in after-hours trading Friday. Year-to-date, SPY has gained 21.59%, versus a 21.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
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