U.S. and China moving closer to their first face-to-face trade negotiations in months

Highlights: 

Market Recap: Global equity markets were up yesterday. The Nasdaq 100 (QQQ) led all markets, gaining 0.80%. The 10-year yield was flat on the day, but long-term Treasuries finished positive (TLT).  The U.S. Dollar was also stronger.

Economic Data: The Chicago Fed National Activity Index came in at -0.02 last month.  This data is indicative of slowing economic growth in the US.

 

Silver: Silver broke out above resistance last week and continued the rally yesterday. Silver is back above its 200-day moving average and in a positive trend. The Silver/Gold ratio is still in favor of Gold and in a negative trend. This implies that positive relative strength resides with Gold.

High Beta: High beta stocks (SPHB) have remained in a negative trend relative to low volatility (SPLV) since peaking in June of last year.  The ratio failed to breakout above the 200-day moving average after testing it from the bottom in late April.  It essentially crashed from that level, breaking to new lows and flashing a massive negative divergence from broad equity markets.  Can high beta finally break to a positive trend relative to low vol?  That would be bullish for equity markets.

Semiconductors: We discuss semiconductors a lot in our commentaries.  The reason is that we believe the sector is a leading indicator for equity market strength or weakness. Currently, semiconductors are impressively strong despite weak fundamentals and depressing earnings expectations.  Relative to the broad market, semiconductors (XSD) are close to all-time highs and are in a strong positive trend.

Apple: The top performing Dow Jones Industrial stock yesterday was Apple (AAPL), up 2.29%.  Apple has been one of the market leaders during post global financial crisis period.  Apple is in a positive trend but has yet to break out to new highs in confirmation of the broad stock market (SPY).  Market bulls want to see Apple break to new all-time highs and confirm the broad market.  This would cancel an otherwise negative divergence.

Futures Summary: 

News from Bloomberg:

Congressional leaders and President Trump reached a bipartisan deal to suspend the debt ceiling and boost spending for two years. It cancels automatic domestic and military spending cuts, and increases the budget cap for discretionary outlays. The House must approve it this week before recess. Democrats are quietly expressing concern that it sets the stage for a bigger budget fight six months into the next president's tenure. Here's a QuickTake on the debt ceiling debate.

The Trump administration is moving to end food stamp benefits for 3 million people with proposed new regulations limiting states' leeway to automatically enroll residents who get welfare benefits. Agriculture Secretary Sonny Perdue said states "have misused this flexibility." House Republicans tried to impose similar restrictions on the program last year but were rebuffed in the Senate.

The U.S. and China are moving closer to their first face-to-face trade negotiations in months, with a meeting between seven tech CEOs and Trump marking another step toward easing a ban on sales to Huawei. They agreed on the need for some national security restrictions on telecom equipment deals with the Chinese firm and asked Trump to push for timely licensing decisions from the Commerce Department.

Apple is in talks to buy Intel's struggling cellular-modem unit, a person familiar said. The deal, which would cover patents and staff valued at $1 billion or more, may come this week. The move to reduce its reliance on Qualcomm for modems is wise and gives Apple more control over a critical component, Bloomberg Intelligence said.

U.S. stock-index futures rose with European and Asian shares amid a busy week of corporate earnings and potential developments in trade negotiations. Oil stabilized and the dollar climbed. Gold fell.