For the second time this week market players were caught by surprise when the market surged higher on headlines about progress in the negotiations over trade with China. Overly anticipatory bears and underinvested bulls found themselves scrambling to reposition once again.
It is understandable that after the strong run-up from the December lows that there are many market players looking for a pause or pullback. But they keep underestimating how much hope there is in this market for a resolution of the China trade issue.
The rhetorical question being asked is "how many times are we going to rally on China trade headline?" The answer is every time there is a headline. It is reflexive action and won't be fully discounted until a deal actually does occur.
This dynamic creates a dilemma for the bears that are convinced that they have a compelling argument against the market but few are going to embrace the pessimism with the potential of positive headliens lurking.
It was a very strong day again with breadth much better than 3 to 1 positive but there was notable weakness in the FAANG names while financials and banks stood out on the positive side. It was a peculiar rotation but there was still very broad strength.
Its been a good market for stock pickers and there is still plenty of interesting charts. The market may seem extended and even downright frothy but trying to fight this action simply does not work.
Have a great weekend. Don't forget that the market is closed on Monday. I will see you on Tuesday.