Wall Street closes in a sea of green following relief rally on trade war cease fire; DJIA eyes the 76.4% Fibo

• Risk appetite was elevated in European and US trade, tracking a bullish start in the Asia open following a relief rally in equities, the Chinese yuan and commodities stronger after the US-China trade truce. 
• Among the 30 components of the Dow Jones Industrial Average, all but five were up in the first few minutes of trading.
• Still some confusion over just what had been agreed between the US and China.

On Wall Street, the Dow Jones Industrial Average DJIA, was up 432 points (1.7%) in the first few minutes of trading on Monday, while the S&P 500 jumped 1.4% and the Nasdaq Composite Index COMP, +1.51% gapped 2% due to Trump and Chinese President Xi Jinping agreeing on move forward with trade negotiations. 

The mood was also lifted with a 4.5% increase in West Texas Intermediate crude where an agreement between Russian President Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman to cut production was made on the same day on the sidelines of the G20 summit.

The reactions to the trade war truce were largely maintained. However, there were no significant extensions as there is still some confusion over just what had been agreed between the US and China, due to stories being run in Chinese official media and takes on the official statements from Washington and Beijing - US indexes did drift lower after opening sharply up.

Indeed, there is a caveat to Trump's offerings and the US could still go ahead with the 25% tariff increase if both sides fail to agree on anything new within the 90 days. Trump has warned that if unless China could find a way to tilt the balance of trade power more favourably towards US businesses, hostilities will resume in January. However, for the meanwhile, it is all positive in the stock markets, and Trump tweeted that “relations with China have taken a BIG step forward! Very good things will happen.”

US data 

As for data, the headline ISM rose to 59.3, exceeding expectations, with new orders doing the heavy lifting at 62.1 versus 57.4. Employment and production were also higher- (Prices paid dropped to 60.7 (mkt: 70.0; last: 71.6) with the October/November collapse in oil prices already feeding through).

Fed speakers

We also heard from Fed's Clarida and Quarles speaking. Clarida argued that the “Powell Put” is not a useful way to describe what the Fed is doing. Then, saying, “We are in a world where central banks, including the Fed, are focused on keeping inflation away from disinflation,” which sound a little dovish and more in line with the Powell put. Quarles mentioned that the market seems pretty clear what the Fed intends to do, saying that he is content with the recent repricing of the Fed curve and adding that they are "coming up to the bottom of the Fed neutral rate range".

Among the 30 components of the Dow Jones Industrial Average, all but five were up in the first few minutes of trading:

The Dow Jones Industrial Average finished up about 290 points, or 1.1%, at 25,826, but had been higher by as many as 442 points in early morning action. The S&P 500 ended 1.1% higher at 2,790, with gains in the energy sector XLE, +2.22%  due to a higher price in crude. The Nasdaq Composite Index advanced 1.5% to 7,442.

DJIA levels

Meanwhile, the index is holding above the 50% Fibo of the Oct decline at 25522 and broke with the confluence of the 50-D SMA. Bulls pierced the 61.8% fibo at 25854 through R2 at 25850 and touched R3 up at 26070. With daily RSI still with plenty of room to go, and DMIs more favourable to the upside as well, there is every chance that the index can take on the 76.4% fibo retracement of the same decline at 26265; At which point, Trump will be likely tweet, "I told you, it was just a healthy correction," and we will be in the running for a 100% reversal of the October rout, back to 26951.