Trade Deal Sparks Rally, CPI Looms — Can Bulls Hold Ground?

E-mini S&P (June) / E-mini NQ (June)

S&P, last week’s close: Settled at 5678.00, down 6.50 on Friday and 31.00 on the week

NQ, last week’s close: Settled at 20,136.75, down 11.25 on Friday and 58.50 on the week

E-mini S&P and E-mini NQ futures are sharply higher after a successful meeting between U.S. and Chinese trade representatives in Switzerland this weekend. The “trade deal” brings a 90-day pause to the escalation. The U.S. has brought tariffs on China down to 30%, and China has cut them to 10%. U.S. Treasury Secretary Bessent said “neither side wanted to decouple” and more talks are planned.

We see three major tailwinds to this 3% move in E-mini S&P futures that are intertwined. First, earnings have been strong, and we may have seen overcompensation in downward revisions that are quickly being reconsidered. Second, the market quickly discounted the worst-case scenario in the aftermath of April 2^nd, and investors are offsides. Finally, President Trump’s telegraphing during negotiations creates these types of whipsaws to both the downside and upside. Even as recent as news Thursday, where it was reported the U.S. may bring tariffs on China down to 50%, and markets rallied. On Friday morning, 80% was floated, and stocks reacted negatively. Now, 30% has been agreed, and here we are.

E-mini S&P futures blew through rare major four-star resistance at 5826.50-5834.50 at the European open overnight and have held out above there into the U.S. opening bell. This certainly could be a strong day that keeps on going, but traders should also keep in mind that CPI is tomorrow morning and monetizing such a dramatic move is prudent and smart, in this enviornment. With that said, holding above this…