President Trump tweeted Thursday that China and the U.S. were getting “very close to a [trade] deal.”
The stock market immediately rocketed. Trump says he has approved the so-called phase-one trade deal with China. The details are still lacking, and hiccups cannot be ruled out.
Here is an instructive look below the surface as a result of Trump’s tweet. Let’s start with a chart.
Please click here for an annotated chart of ETF DIA which tracks the Dow Jones Industrial Average DJIA. Similar conclusions can be drawn from charts of S&P 500 ETF SPY and Nasdaq 100 ETF QQQ.
Note the following:
• The chart shows a strong up move in the stock market after Trump’s tweet.
• The chart shows a significant pullback from the highs before the rally got a second wind.
• The most important thing to note from the chart is the VUD indicator. The VUD indicator is the most sensitive measure of net supply and demand in real time. Orange shows net selling, and green shows net buying.
• The VUD indicator shows that there is quite a bit of selling as prices have moved up. This indicates that many investors are selling into the strength.
• The volume picked up after Trump’s tweet. This is a positive.
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Segmented money flows provide an X-ray of the stock market, giving an edge to prudent investors. Here are the money flows after Trump’s tweet.
• The momo (momentum) crowd is aggressively buying stocks. The smart money is lightly selling into the strength.
• The momo crowd is aggressively buying popular large-cap stocks such as Apple AAPL, Google GOOG, GOOGL, Facebook FB and Amazon AMZN. The momo crowd is also aggressively buying semiconductor stocks such as Nvidia NVDA, Micron Technology MU, Intel INTC and Skyworks SWKS.
• The momo crowd is aggressively selling gold. The smart money is inactive.
• The momo crowd is aggressively buying oil. The smart money is selling oil….Read more at MarketWatch.
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