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On Friday I wrote this paragraph at the end of my note:

S&P remains stuck at 3100 but if we are closer to a deal than not, then look for the algos to try and push it higher and break this logjam. As noted a month ago, if you draw a trend line, resistance should be at 3125. So a push higher to that level is not out of the question. Until we get clarity, 3100 just feels like a wall.  

Until we get clarity! That about says it all. On Friday the algos and investors appeared to be “clarified.” Stocks surged higher, breaking the logjam at S&P 3100. By the end of the day, the Dow gained 225 points or 0.8%, the S&P advanced by 24 points ore 0.77%, The Nasdaq rose 61 points or 0.73%, and the Russell finished the day up 7 points or +0.48%. All because National Economic Advisor Larry Kudlow told the world that we just a “few short strokes away” from a deal. Treasury yields rose as investors hit the sell button and Gold backed off by $4.50. The algos are shifting into high gear as the celebratory mood embraced 9 of the 11 S&P sectors, leaving basic materials and the homebuilders behind. (And that might make some sense as treasury yields rose, and it is also a slow time of year for the housing industry.)

As you can imagine, technology led the way, not only because of the trade deal, but because Applied Material surged. It rose $5 or 9% after they boosted their chip equipment sales forecast in 2020, apparently not a bit concerned over trade. Now this is in direct contrast to what we heard earlier last week from CSCO. Remember, they hit the tape with a downward revision to their sales numbers, saying that global economic concerns over trade led to a slowdown in orders for “routers and switches” leaving them in a lurch, sending their stock down 7.5% on Nov 13. But now that Larry tells us that we are only “short hairs” or “short strokes” (can’t remember) away from a deal, then that must mean that the CSCO story is a “turnaround” story. All they need to do is close that $3 gap they created last week and it’s off to the races!

Are we setting ourselves up for another chapter of “The Boy Who Cried Wolf?” How many times have we heard this same line: “We’re 90% there…” (Stevey Mnuchin, back in June) Then China says were almost there in October, then Trump tells us that Phase One of the trade deal is done (in concept) and now just needs to “tightened up” last month. Now Larry tells us that we’re “so close.” It’s exhausting really, but what it tells you is that the market and global investors want clarity and every time it seems to be clear, someone stands up and says “not yet.”  

“We are at an inflection point to the run up of President Donald Trump’s next threatened tariff hike on Dec 15…” says Robert Hormat, Vice Chairman at Kissinger Associates, “this has to be done relatively soon, or else the danger of things getting worse in mid-December increases and markets will be disrupted.”

That is the next key date to watch. If that is true, we have exactly four weeks until it all unravels. Unless, of course, we are “so close” that Trump decides to delay those increases in a show of good faith, which might make some sense in order to keep the markets calm into year end.

Over the weekend, word is that Stevey Mnuchin and Liu He held more constructive talks to address some of the sticking points that remain in the Phase One agreement. In addition, the US is supposed to begin granting the licenses that will allow US companies to do business with Huawei by month end. In a surprise move, the PBoC (Peoples Bank of China) cut their seven-day repo-rate and they injected some $26 billion into the financial system to combat the most recent weaker macro data. In Hong Kong, the violence is only increasing and it is only a matter of time before China decides that they have had enough. Understand that the US has called for restraint by the Chinese and trade negotiations can be driven by what happens next in HK. Protests are now in their sixth month, with no end in sight.

Japan +0.48%, Hong Kong +1.35%, China +0.80%, and ASX -0.40%.

In Europe, the markets there have gotten off to a slightly weaker start. The UK is set to air their first live debate between the two candidates. PM Bojo is still in the lead as he continues to pledge to end BREXIT uncertainty. Otherwise, trade concerns continue to drive the bus. We will hear from the ECB (European Central Bank) President Christy Lagarde and Bundesbank (Germany) Chief Jens Weidmann mid-week.

FTSE +0.02%, CAC 40 -0.15%, DAX -0.20%, EUROSTOXX -0.20%, SPAIN – 0.24%, and ITALY -0.14%.

US futures are edging higher again this morning, continuing to build on last week’s surge. Dow futures are +66 points, S&P’s + 5 points, the Nasdaq +20 points and the Russell is ahead by 1 point. Building excitement over a Phase One trade deal continues to drive the algos. Talks are being described as “constructive,” fueling the moves higher. In the background though, the US is very concerned about how China will choose to deal with Hong Kong as the unrest heats up.  

As noted at the top, the S&Ps have now decisively surged up and through 3100, ending Friday at 3120. Recall that the trend line drawn from the April high suggested that a run to 3125 would not be out of the question. And it apparently isn’t. With this morning’s futures move, the S&P would open at 3125. So what’s next? Well, since we are well above the formal trend lines, we need to interpret what the next move could be. So a trend line drawn from December 2018 suggests that we could trade up to 3145. Stay tuned…

Economic data this week includes Building permits, Housing starts and FOMC mins. Fed speakers include NY’s Johnny Williams, Minneapolis’s Neely Khashkari, and Cleveland’s Loretta Mester.  

Oil is trading at $57.85 up slightly over last week. Excitement over trade is driving this move. We are now trading above long term resistance at $57.45. More positive news over trade is sure to push oil towards $58/barrel. Over the weekend, the Saudis announced that they are pricing the Saudi Aramco deal at about $8/share with the final price to be announced on Dec. 5, well below what the Kingdom wanted. In addition, there is little interest in the deal coming from the US, Australia, Japan, and Canada so they have decided not to offer the deal in those countries. The Saudis though are making generous loans available to their citizens so there is plenty of country participation leading to a successful deal.  

Take good care.


Mushroom “Pesto”- This recipe came to me from a dear friend – who is also a foodie – it was one of his specialties and he was kind enough to share it. I made it last night – see photo.  

Now this is not the pesto you are thinking of – yet it is made almost the same way – I said almost… so for this you need:  

2 containers of sliced white mushrooms, garlic, Parmegiana Cheese, Walnuts, Olive Oil, s&p, butter and maybe a bit of half and half. For an extra kick – you should buy some “truffle laced gouda” – just wait – see below.

In the food processor – add 1 and a half containers of the sliced mushrooms, 1 glove of garlic, olive oil and 3 or 4 walnuts (shelled!).  – Blend until all chopped up. Open the top and now add a handful of cheese and maybe a bit more olive oil IF it’s too dry. If not – then don’t. Season with s&p – (not too much salt – the cheese is salty) Blend again. Now add in maybe quarter cup of half and half. Blend and set aside.  

In a saute pan – melt half a stick of butter and add the rest of the mushrooms – saute until they are nice and browned up.  Maybe 10 mins or so… (You’ll know when they are done). Now here is the trick –Turn the heat to med low-  add the mushroom “pesto” to the saute pan and blend it all together. Stirring so that you get it all mixed. No longer than 3 or 4 mins…  turn the heat off and set aside.

Now bring a pot of salted water to a rolling boil – add the linguine (or whatever pasta you prefer) – cook for 8 mins or so strain – reserving a mugful of the water. Return to the pot – add back just a splash of the water – and now toss in the shaved truffle gouda first – letting the hot pasta melt the cheese – (here is a little trick – put the burner on low and stir the pasta on the stove – so that the heat helps the cheese melt)

Now add in the pesto sauce – not all of it – just enough to coat it. You can always add more if you like. Always have extra cheese on the table for your guests.  

Buon Appetito.