The only issue that has mattered to the market all week is China trade negotiations. Overall there has been an optimistic bias despite some negative rumors and the fact that chances of a comprehensive deal are nonexistent. It is widely anticipated at this point there will be some sort of mini-deal made today that will be more of a truce than a solution.
Trade negotiations continue this morning and will be concluded when President Trump meets with Chinese Vice Premier Liu He at 2.45 pm ET today. Trump has indicated that 'negotiations are going well' -which is nothing new - but the way that events have been progressing there is the suggestion that a deal won't completely fall apart like it has previously.
Many market participants are so tried of the focus on the trade issue that they will likely celebrate no matter what happens. It has been nearly impossible to trade this week as market direction has been solely a function of the next tweet or headline about China. Individual stocks have been moving around randomly and that is helping to form some decent technical patterns but it has been extremely difficult to put any money to work.
The big question that traders are contemplating now is whether the meeting with Trump this afternoon will be a 'sell the news' event. The indices are running up sharply this morning and are currently at their highest point of the week. A minor deal seems to be the consensus belief at this time but will that announcement bring in even more buying?
There is a good likelihood that there will be some sort of 'sell the news' reaction but that it will be delayed. It won't be until next week that market players will start thinking about how this miserable trade issue is going to drag out.
One positive that the bulls have going for them at this point is that the 'sell the news' reaction is so painfully obvious. This clearly is not going to be a comprehensive deal and the most difficult problems are being pushed down the road so it makes sense to sell the news after a strong run-up.
The optimistic spin is that the market is finally freed of the tyranny of this issue and that will allow some pent up buying to take place. This has been an extremely tough market for stock pickers for a while but with this issue no longer dominating the action and third-quarter earnings season starting next week, it may finally clear the air and allow for stock selection rather than just dancing around to the indices.
There is upbeat sentiment to start the day and expectations are quite high. If the market keeps running up into the meeting between Trump and Liu the potential for some profit taking in front of the weekend will be quite high.