As happens so often with the market in recent years, the indices are saved from a bearish technical setup with surprise headlines. It was announced that trade negotiations will be held again shortly and that the 10% tariffs on $300 billion worth of Chinese imports will be delayed from Sept. 1 to Dec. 15.
This news triggered over 30 large buy programs and wiped out yesterday's losses in the blink of an eye. The dollar flew higher, bonds reversed lower, gold fell and equities jumped. In other words, everything that happened yesterday was reversed in a matter of minutes due to a couple of headlines.
The reversal is a relief for market players that have been watching long positions struggle, but from a trading standpoint there is much opportunity for slow-moving humans. There was no logical reason to anticipate this reversal at this point. I'm sure there were some lucky folks that caught it but that isn't luck and not skill.
I'm holding very high levels of cash so my game plan is to wait to see how well this spike holds. The longer it holds the better the chance we can find individual stocks that will develop some sustained momentum. I'd much rather focus on stock picking than timing the indices right now.
So far this bounce isn't enough to shift the market to an uptrend but it has the potential to be the start of some solid support. It appears that there is more fear of missing out than fear that the bounce is going to fail.
