With Federal Reserve interest rates cuts, Crude oil tensions in the middle east and continuation of U.S. and China Trade talks all playing some part in the same week. Quite honestly it left me feeling a bit overwhelmed as I was fighting to determine which would play a larger role. Which news story would shift the tides this week.
When we look at the Federal Reserves the market was not very responsive to the cut on Federal Interest rates. Traditionally when there is an adjustment to interest rates there is usually a strong move that supports the news. This last week after the rate cuts we saw how the market was fairly unresponsive almost numb to the news. Seeing how there was little reaction off the move had me feeling a bit confused.
With rumor of further rate cuts and with pressure from President Trump to drop them down to 0% watching closely to see any speeches from the Feds is key in ensuring we do not get any surprises downline.
The Chinese Trade Delegation team had some days scheduled to come out to see our American Farming industry in Montana first hand. The idea of this was to highlight our standards and broadcast our abilities to provide them with beef products. This meeting was cancelled before it even began. This is not an optimistic sign toward the U.S. and China trade war. Should this trade deal go unsettled then this could result in major economic downfall for the U.S.
The U.S. is fighting for a chance to show that we are capable of producing to meet the needs of other nations. We have once before maintained a strong position as a global power across the world. As the world has been advancing with new technology we have been sluggish to maintain at the forefront of new technology and logistics practices. Our rate of growth is dramatically slowing compared to other nation in the Pacific Rim.
Personally I feel that Trump has a great responsibility on his shoulder to be able to come to an agreement that will ensure the future of the United States Remains optimistic. Just recently the U.S. removed a few sanctions that were placed towards China as a measure of grace towards fostering the relationship between the two super powers.
Overall personally speaking we need to understand the overall power that lies behind the Chinese economy. With most of their largest companies having close connections with the government this is quite different that how many U.S. companies do business.
Today we live in an information age of where data and analytics control the manner in which we operate a majority of the macro scale economics in our environment. China is very strict in terms of how they control information in their country.
The media is controlled by the government and a majority of applications which promote the sharing of information and ideas are blocked and shut away from the citizens.
In the same token they have been able to collect billions on data points on their citizens through cameras in the cities that are capable of tracking individuals as they walk through the city in crowded areas.
The implementation of their cell phone technology allows for the hardware to track location settings and search history to build profiles and databases of individuals. This information can then be used as record for future events such as court cases and investigations as it is stored for future access.
In addition to China being one of the countries that tracks its citizens, it also creates products and services that can be sold overseas to various countries. We have already seen their technology being used in various infrastructures in other countries as governments have reached out to china asking to use similar systems that which they have already incorporated in their country.
Let’s take a look at the current U.S market by analyzing the Dow Jones Industrial Average to get a better idea of how these trade talks are currently affecting the market and what to look for moving forward.
Dow Jones Industrial Average (DJI)
Looking back at the last year we see how price has been really tight within this wide range that we are currently stuck within. Overall the Dow Jones hit an all time high near the end of July before having a quick sell off. We saw stocks have great optimism last month although when we reached the previous major high we were unable to break above.
Based on the technical of the chart we can see how price has room to test back down towards the previous trend line where we have seen a great deal of consolidation. With tension between trade wars at the peak of the headlines this month we are all sitting patiently waiting for the next tweet by trump to determine what the outcome of the deal will be.
Fundamentally if nothing gets resolved in the next two weeks we can see price come down towards the first yellow diagonal line. Uncertainty in the market can often bring a reduction in price as investors look to put their money in places that will have less risk. The safe havens are often known as Gold, Government Bonds, and even other currencies like the Yen or the swiss franc. These so called safe havens are where smart money investors reallocated their capitol towards as compared to the stock market which tends to carry greater risk.
I am going to be adding more charts up this week on various stocks and currency pairs that are expected to see some large movements this week. If you have any questions or want a second pair of eyes on your chart that you are trading on send me a message and we can work together to figure out what the best trade is going to be.
As always please do keep in mind trading contains a great deal of risk and you should never trade more than you are willing to loose. As with most investing the potential to loose your entire initial investment is possible. I personally have had a bearish view on the market lately as the level of uncertainity is rising. Unless we are able to get clear answers on the progress of this trade deal we may continue on this sideways trend.
What are your thoughts on China pulling out of the meeting with U.S. farmers?