The announcement of a trade deal with China is a chaotic mess. The deal was announced at a press conference in China and then President Trump confirmed it via tweet. Many of the terms and conditions are unclear such as the actual level of farm product purchases by the Chinese and whether there is intellectual property protection.
What is known is that some of the tariff increases that were to go into effect on December 15 have been canceled. Other tariffs in the future may be canceled and the Chinese have agreed to some purchases of U.S. products.
Negotiations will begin again soon and will be called 'Phase Two" even though many of the Phase One issues are still quite unclear.
What the market wanted was a delay in the December 15 tariffs which it got, but the deal is so vague that we are seeing some accelerated selling on the news. There already was a setup for a 'sell the news' reaction and the manner in which this deal was done and announced is only adding to it.
The indices are still holding up quite well and breadth is running 4 to 3 positive but there is plenty of skepticism about the value of this deal and whether it is very meaningful.
Traders will be watching carefully to see if the indices make lower lows intraday and whether we have a weak close. If a 'sell the news' reaction seems to be taking hold it is likely to gain traction quickly.
I've cut a few things and am taking a cautious approach here. While the indices may hold, it doesn't look like we are going to see wild euphoric buying in response to this trade deal.