After plunging on trade war worries on Monday, the indices have managed three straight days of gains.
The buying actually picked up steam Thursday morning and looked downright euphoric for a while. This was partially driven by some good earnings news from Walmart Inc. (WMT) and Cisco Systems, Inc. (CSCO) , but was also driven by the quarterly filings of major hedge funds that showed increased positions in some popular, big cap FAANG names.
What was most notable Thursday was that there was not any obvious trade headlines driving the action.
Nothing much has changed since Monday in regard to the China negotiations. The negotiations will continue, but it will be months before anything is likely to be done. In addition, the conditions for retaliation have increased due to the executive order against Huawei Technologies and other Chinese telecommunication firms.
The intraday euphoria fizzled out in the close, and the indices gave back a substantial amount of their gains. Breadth was still quite positive, and the gains were still sizable, but the overhead resistance at last Friday's highs came into play and some profit-taking started to pick up.
The question now is whether the V-shaped action that I discussed in my morning post continues, or is this going to turn into a failed bounce that leads to the retest of the recent lows.
I don't have an answer to that. However, I have been leery about chasing this bounce, and it will be easier if we now see some consolidation rather than straight-up action.
I'm still carrying very high levels of cash, as I wait for better technical setups to develop. This weak close Thursday is what we need to make that happen, but patience is still necessary.
Have a good evening. I'll see you Friday.