INVESTORS, WATCH OUT: OPTIMISM OVER U.S.-CHINA TRADE DEAL COULD EASILY TURN INTO PESSIMISM $SPY $DIA $DJIA $GDX $SLV $MU $AAPL $AMD $AMZN $INTC $MSFT $NVDA $FB

There are two pieces of news on the U.S.-China trade deal for investors to know today.

First, China is promising more protection for intellectual property. Second, despite contradictory media reports about a trade deal, there is some credibility to Gao Lingyun, an expert who is apparently close to the trade talks, saying that the “two sides have reached a broad consensus” for the first part of an agreement.

Wall Street is optimistic. Stocks are up — at a new record, in fact. How should investors think about these positive reports on trade? Let’s explore the issue with the help of two charts.

Please click here for an annotated chart of S&P 500 ETF SPY.

Please click here for an annotated chart of Dow Jones Industrial Average ETF DIA.

For the sake of transparency, both were previously published and no changes have been made.

Note the following:

• For a longer-term perspective, the first chart is a monthly chart.

• For a shorter-term perspective, the second chart is a weekly chart.

• The monthly chart shows that the stock market is extended way above the trend line. This is a negative.

• The monthly chart shows relative strength index (RSI) divergence. In plain English, this means that as the stock market has made new highs, RSI is significantly below the prior high. This is a negative.

• The weekly chart shows that there is a good setup for the Dow Jones Industrial Average DJIA to reach the first target of 30,000 points.

• The (RSI) on the weekly chart shows that the market is overbought but there is room to run. Often this means a very short-term pullback and then a higher high.

What does it all mean?

When I gave a “buy” signal on Donald Trump’s election at a time when many were predicting a big stock market drop, it was at first met with incredulity. When I called for a high-probability scenario of the Dow Jones Industrial Average hitting 30,000 points in Trump’s first term, I received a ton of hate mail. I have subsequently repeated that call in Trump’s first term several times. (Please see “Here’s the case for Dow 30,000 in Trump’s first term.”)

Now, a few years later, Dow 30,000 calls are commonplace. So what’s next for the stock market?…Read more at MarketWatch.

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