When navigating the market, nothing is more important than having a feel for the character of the price action. Rather than argue about how the market is behaving, the best course of action is to try to understand what is driving it. It isn't necessary that you agree with the action, you just need to appreciate what might be causing it to act the way it is.
It is easy to understand the bearish arguments right now. Doug Kass spells out a long list of negatives that he is convinced will lead to a market correction. All the arguments are very logical and compelling, but the market isn't paying attention to them Tuesday. The character of the market action renders those negative arguments as ineffective. Nothing much has changed fundamentally in the last 24 hours but the character of the action has shifted.
There are several things that are causing this positive priced action. First is that the China trade issue is no longer dominating the headlines. It was tiresome and repetitive and many market players are relieved to not have to deal with it -- at least a little while.
With that big macro news no longer dominated the action, market players are free to focus on earnings and the first day of third-quarter results aren't bad. Even Goldman Sachs (GS) , which had the worst report of the day, has bounced back and recouped most of its losses.
The main shift in market character I am seeing Tuesday is that the focus has moved from macro to individual stocks. That makes sense during earnings season and is a relief for traders like me who prefer to pick stocks rather than guess short-term market direction.
The question now is whether this shift in market character will persist. There are a slew of major earnings reports in the next couple weeks and no immediate news expected on China or from the Fed so the coast is clear for more of a focus on stocks. Surprise news can change things quickly but typically after macro-driven action, better stock-picking will prevail for a while.
This change in market character is some of the best action the market has experienced in a while. Indications are that it will likely last more than a couple of days.