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Things you should know

  • Rumblings of a Trade     Deal are everywhere
  • Global mkts marching     higher
  • Wilbur, Stevey and Bobby     – all off the ‘grid’
  • Mkts in a Tug of War

So stocks moved higher again on Friday as the reality of a trade deal gets closer and closer……The Dow added 110 pts, the S&P surged by 19 pts, the Nasdaq added 62 pts and the Russell moved higher by 14 pts – Energy names surged taking the XLE (Energy ETF) higher by 1.8%, followed by healthcare – XLV (Healthcare ETF) up 1.42%,

and over the weekend – more good news hit the tape – a deal is all but done……Yesterday – the Chinese offered to reduce tariffs on a range of American products – in a good faith attempt of securing a deal with the US.  In Friday’s note I ended with this:

“We are now only 31 days away from the end of the 1st qtr – the indexes are all up double digits and if we get a trade deal this month – we can expect that the surge will continue…stay tuned – this weekend could reveal much more…”

 And so it did – ….this morning -CNBC runs with this headline:

 “Dow Futures Higher on Hopes of China-US Trade Deal” and our friends at GS chime in and offer to discuss it –

 “Goldman Sachs Takes a Look a What a US/China Deal Might Look Like”

 The WSJ runs with this line:

 “China, US Near Accord on Trade” suggesting that we in the ‘final stage of completing a trade deal’

 Global mkts are on a tear… the reality of a deal is closer than it ever was….Asian mkts surging – and China closed higher by 1.18%……this deal – if it is as expected – could lift almost all of the US tariffs on Chinese products as long as the Chinese follow the rules and honor the deal.  Top of the list are the protection of intellectual property rights and the forced transfer of technology…..

 Now look – most of the information that we are getting are by people who are ‘NOT AUTHORIZED’ to speak publicly… you must take all of this with a grain of salt…. – suddenly Bobby Lighthizer, Wilbur Ross and Stevey Mnuchin have all gone silent – which is its own indication that something is happening…because when we were far away from any deal – NONE of them could keep their mouths shut…and now that we may be upon a deal – NO ONE is talking ON the record…..OFF the record though – there are plenty of indications of interest from both sides…but in order to keep it from running completely wild – those same people caution that while the agreement is taking shape – hurdles remain high and ‘each side faces possible resistance at home’ that the terms may favor one side more than the other….

 Remember – Donny’s recent failure in Vietnam with the North Koreans can play out two ways –  Either it is recognized that he is willing to walk away from any deal that does not meet his standard – keeping the Chinese seated at the table – or that his failure in Vietnam only makes him need a win even more – giving  Xi Xi – the upper hand….. 

 Now the analysis is all the same – this deal will get done if the conditions are met – period.  China wants us to remove the $200 bil of tariffs on Chinese goods and the US wants to make sure that if we do that – that the Chinese will actually meet the obligations of the deal…..Best case is that we lift the tariffs over a period of time – this would allow both sides remain honest…..Talk of a Mar-A-Lago summit in March continue – but there is not set date yet – although March 27th is being bandied about…..which btw is 2 days ahead of  D-Day for BREXIT – the UK/EU divorce. 

 Overnight – Asian mkts all moved higher – Japan +1%, Hong Kong + 0.51%, China +1.18% and ASX +0.40%.  The talk is all about the possible trade deal….nothing else really matters at the moment.

 In Europe – mkts there are also all higher as the excitement builds over trade – yet simmering on the back burner continues to be BREXIT and what happens if March 29th comes and they don’t have a deal?  Will the UK walk out the door or not?  Word out of Ireland’s Sunday Independent newspaper revealed that the Prime Minister’s office seems to be suggesting that a delay until June was ‘very likely’….according again to an ‘unnamed minister’ – just another example of  people who are not supposed to be talking are all the ones doing the talking…..(funny how that works).  The EU will get a read on Producer Prices later today – but don’t expect that data point to move the mkts at all.  FTSE +0.40%, CAC 40 _+ 0.56%, DAX + 0.09%, EUROSTOXX +0.26%, SPAIN + 0.16% and ITALY + 0.06%. 

 US S&P futures are up 9 pts , while Dow futures are up 75, Nasdaq futs and Russell futs are up 30 and 2 pts respectively.  Remember – the mkt is up nearly 20% since the end of December – as we continue to see a string of higher highs and higher lows –and while the news of a trade deal is all positive – you have to ask how much of that is already priced into the mkt and how much is not?  Do not be surprised at all if a deal is announced and the rally stalls – causing a reversal in the trend…the mkt is not going to fall out of bed – unless the deal completely breaks down – which is highly unlikely, but none the less – we could see a pullback…..……I would argue that any pullback in March only sets us up for gains post April 15th…..Remember – we always see pressure on the mkts as we get closer to April 15th and this year will be no different – especially as the reality of the TAX Reform act kicks in….we have already heard countless stories of how people are getting clobbered because they did not adjust withholdings appropriately and that could cause some tax selling over the next month.  Look – it happens every March into April – the mkts come under pressure as we approach tax day – and then they quickly recover post the 15th. – it’s a kind of ‘tug of war’. 

 The S&P closed above 2800 on Friday and is currently up 9 pts at 2815…challenging the most recent highs of 2813 on February 25th.  If she is successful at holding the line here – then there is a clear path towards 2900…..but like I said – do not be surprised to see a rally on the ‘continued expectation’ of a deal and then a possible pull back on the ‘announcement’ of a deal.  Any pullback in my mind would find support at the trendline….2750 or about a 2.5% pullback from here.   

 ECO data today includes nothing….construction spending….exp of +0.2%….NOT a mkt mover at all.

 Oil is up 58 cts at $56.38 on Trade deal hopes…additionally – OPEC production fell to a 4 month low in February and that is also helping to support prices.  Oil is fighting with the intermediate term trendline at $56.32 as it attempts to move higher.  Success here puts it in the $56/$61 trading range…..

 Take good care.


Chicken Soup

 So as your mother always says:  “Have some chicken soup – it’s good for you”. And considering we got nearly 9 inches of fresh snow overnight – it’s time to go to the kitchen…..

 For this you need;  1 whole chicken, 1 beef shank, onions, carrots, celery, water, s&p, beans (cannelloni or cecci).

 Rinse the chicken and remove the innards from the cavity.  Rinse the beef shank – place both in the pot and fill with water.  Now add the chopped veggies.  Season with s&p and bring to a boil.  Once it boils – turn the heat to med low and let it simmer for about an 1 ½ hrs.  Turn heat off – remove the meat and allow to cool.  Add in a can of the beans of your choice.

 When cool – remove the skin and debone the chicken.  Slice into chunky pieces and return to the soup.  Remove the beef from the shank bone and slice into small bite size pieces and return to the pot.  Now – place the pot in the fridge and allow to cool overnight – the fat from the chicken will rise to the top and form a ‘skin’.

Remove from the  fridge and take the fat off and discard.  Re-heat and serve alone or with rice or with elbow macaroni.  Have plenty of fresh grated Parmegiana cheese.

 Buon Appetito

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