Once again, the indices are off to a positive start due to reports of progress on a China-U.S. trade deal. This time, the primary news is that China has moved to strengthen intellectual property rules in several ways. This has been a key sticking point in the negotiations and appears to support President Trump's frequent comment that "China wants a deal."
In Hong Kong, pro-democracy forces won 88.6% of the vote in District council elections, which is a stunning rebuke of China rule. While this doesn't have a direct bearing on the trade negotiations, it presents an additional problem for Chinese premier Xi Jinping and makes it tougher to object to U.S. legislation that is supportive of the Hong Kong protestors.
China is also ramping up tax cuts and is taking action to deal with short-term economic issues.
Although many market players see the ongoing trade negotiations as a farce that will not produce a deal, there continue to be signs that progress is being made and that both parties want to reach some sort of agreement. With this potential out there, there is a steady bid under the market and the bears have not been able to gain any traction.
The indices are in good shape, as they have been consolidating close to highs. The S&P 500 was down three of five days last week, but this looks more like some healthy digestion rather than topping action. It is a particularly good setup going into Thanksgiving week, which has historically been positive.
According to QuantifiableEdges.com, Monday and Tuesday of Thanksgiving week do,n't show any clear edge but Wednesday and the half-day edge on Friday have a history of positive returns. The following Monday has typically been poor. A buy at the close on Tuesday and sale at the close on Friday has typically produced good results.
Many traders look forward to the thinner trading around Thanksgiving, as it often produces some strong pockets of momentum. Traders often tell stories about some of the crazy moves that occurred at Thanksgiving back during the bubble days in 1999-2000. That hasn't happened to the same extent in recent years, but traders often make it self-fulling to some degree.
Overall, the market has positive news, a good technical setup and a tendency for positive seasonality. With many market players trying to call a top, there isn't any real euphoria and there is still quite a bit of "fear of missing out."
For weeks now, I've been preaching to stick with the positive price action and to avoid the temptation to try to predict a market turn. There is nothing happening to suggest that it is time to become more negative. The best opportunities remain on the long side.