Futures vs FV: SP +37.68; DJ +429.56; NASDAQ +138.49
Futures gapped upside over 400 Dow points when opened thanks to the US/China deal to hold off additional tariffs for 90 days and attempting to reach a comprehensive deal during that period. Additional China purchases of US goods (e.g. soybeans) and a supposed reduction or elimination of tariffs on US autos according to a Trump tweet. Al of this launched futures.
Obviously, this kind of deal, one that was the most likely, was NOT built into the market. Many did not believe anything would happen despite the late week assurances a deal would be struck. Now there is the usual odds assigning whether a real deal will be struck. GS gives it a 20% chance. That said, reports are there was a genuine offer from Xi. We will see. For now stocks are set to gap higher.
Oil: Up 5%. Qatar quitting OPEC, says Saudi Arabia is not the reason. Sure it's not.
Upgrades: CAT, T
Downgrades: COST, VZ
Bonds: 3.035% vs 2.993%
Euro/USD: 1.1328. Euro edged higher
USD/JPY: 113.53. Dollar moves up 7 cents
Oil: 53.32, +2.39
Gold: 1237.60, +11.60
Futures gapped higher on the open and have mostly held the range, fading modestly the last two hours. Huge open on top of the rally through Friday. Just one day off, Thursday, along the way. This move will get the indices overbought near term, but it is a yearend rally and often they don't follow typical market ebbs and flows.
Still, chasing on this gap higher is not the best probability. We picked up a lot of positions as this move started and gained some speed, and we likely have to be more content to let them work than pick up a lot of new positions. Will see what kind of entries arise after this gap move because we are always open to good entries when they present themselves.
Jon Johnson, Chief Market Strategist
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