The big market debate today is whether the "deal" between President Donald Trump and his Chinese counterpart Xi Jinping at the G-20 meeting was significant and justifies a strong market reaction.
There is no shortage of comments by pundits how the deal was meaningless and is not a good reason to buy. Some pundits are even claiming that President Trump was snookered as the intent of the Chinese is to drag out the negotiations as long as possible.
The market doesn't appear to agree with the critics. While the opening strength was sold that is routine trading when a market is already overbought and good news is contemplate. Prudent traders take gains into a situation like we had this morning.
After a dip pullback, the S&P 500 found some support and bounced. The important thing is that there is a decent close. Some backing and filling after big moves on the Fed and then China trade is to be expected and is healthy.
The key to the market going forward will be if better individual stock picking develops. In bad markets stocks tend to move in tandem. As things improve individual stock picking should start to work better. If the bulls are serious about building positions into the end of the year, we should start seeing them focus on individual stocks to a greater degree. That will be the big tipoff that an uptrend may gain some traction.
One of the more interesting dynamics at work in this market is how political bias impacts the way the action is viewed. There is no doubt that President Trump is an extremely divisive figure and that seems to create a group of market players that actively root for a negative reaction to the China trade developments.
This same dynamic was in place from the day he was elected with some that oppose him using their political disdain to justify a negative market view. Ironically this probably helped to create positive market action much like the "climb the wall of worry" dynamic does when there is a high level of pessimism.
When the market holds up despite a negative view those who are short or in cash have no choice but to put some cash to work. That helps to push the market higher and forces more skepticism to inch back in. They don't want to embrace the positive view but are forced to when the price action doesn't cooperate with their opinion.
Obviously the China trade issue is a long way from over and the market will continue to bounce around on the issue. But is it a sufficient shift to help put support under this market and provide fuel into the end of the year? Right now that is what the charts are saying but the lack of sustained energy is giving the bears some hope. Stay focused on stock picking, which will be the key.