The markets rose for a second day following trade deal optimism as the Dow Jones Industrial Average gained 88 points while the S&P 500 rose 0.3 percent and the Nasdaq Composite went 0.2 percent higher.
Investors fed off the news that U.S. President Donald Trump is open to extending the 90-day trade truce that is set to expire on March 2. The softened stance by President Trump didn’t necessarily surprise investors, but rather confirmed their notions.
“Markets always assumed the March 1 trade deadline was flexible, but this just confirmed it,” Tom Essaye, founder of The Sevens Report, wrote in a note. “Bottom line, the fundamentals are roughly balanced right now as there is optimism that a trade deal will get done.”
“Looking ahead, a trade deal could reduce concerns about growth and allow the 2019 rally to continue,” Essaye added.
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S&P 500 Makes Bullish Move
In the meantime, bullishness could be looming for stocks as the S&P 500 crossed a key technical indicator, moving past its 200-day moving average–something not seen since December 3. The S&P 500 was down 6.2 percent to end 2018, but it has since recovered after U.S. equities were roiled by volatility to close the year.
To some technical analysts, breaking through that 200-day moving average paves the way for bigger gains ahead. In December alone, the S&P 500 was down 9 percent, making it the worst December for the index since 1931.
“We have become very defensive over the course of last couple of week or so,” said Petra Bakosova, chief operating officer at Hull Tactical. “We’re getting back to the point where we’re seeing the market becoming overvalued.” She added the December sell-off was an “opportunity” for investors if brought valuations to more “reasonable” levels.
An early sign of bullishness came last Friday after the S&P 500 broke past the 2,700 level. Other technical analysts are seeing positive signs of more upside to come despite any pullbacks that may come.
“You could get a pull back to 2,550 to 2,600, and that may be all you need,” said Strategas Research technical analyst Todd Sohn. “I do like what I’m seeing. It’s important to remember the S&P is up 17 percent over 32 trading days. It’s a really good run, and I don’t want to stand in front of it, but at some point, it’s going to need to pause for more than two or three days.”
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