News that U.S. and China trade negotiators will be meeting in early October caught market players by surprise Thursday morning. Stronger-than-expected jobs news, a solid non-manufacturing ISM number and good factory orders news is adding to the positive sentiment.
What is most notable about the setup this morning is that sentiment has been running quite negative lately. On Tuesday the action was downright dismal following the weaker-than-expected ISM Manufacturing number that accelerated the chatter about an impending recession.
While the news about renewed trade talks is being greeted with much skepticism, it still puts many bears in a tough spot as this news has caused a technical breakout from the recent trading range and is generating some buying momentum. There was no dip for bulls to buy after the initial gap-up open and now they are chasing the index ETFs higher.
Typically this sort of action is mostly index driven initially and larger-cap names will lead. However, as it is digested, traders will start focusing more on individual stock-picking. The best way to improve performance with the indices in an uptrend is to buy high-beta individual stocks.
The negative and poor positioning suggests that this move has some room to run. Don't be in a rush to fight it.