It was a busy day of headlines Thursday, as the European Central Bank cut rates and made dovish comments and President Donald Trump agreed to delay imposing tariffs on China for a couple of weeks. There were a number of reports -- some of them incorrect -- of positive progress on the trade front.
What is most notable about the market action right now is how this positive news has been spun by the bulls and bears. The market did not run wildly high on positive headlines. There was widespread skepticism and even mocking of how these developments might benefit the market. Central bankers are widely dismissed as foolish and the trade negotiations as a farce.
It is likely that these negative reactions are primarily a function of poor positioning more than anything else. According to ZeroHedge, Andrew Lapthorne of SocGen concludes that "too many investors are poorly exposed to positive news."
This explains why the bears cannot generate downside traction. They are constantly tripped up by positive news headlines that they try to dismiss as irrelevant or meaningless. When there is negative news it is already anticipated and does not have a major impact.
It is a peculiar sentiment environment right now, with many market players anxious to embrace the much anticipated bearish narrative, but the market refusing to acknowledge the bearish arguments. Market players are prepared for bad news and when it doesn't occur we have days like Thursday.
The next major news item on the agenda is the Fed interest rate decision on Sept. 18. There is going to be a very intense debate over whether there is a risk of a "sell the news" reaction, but with so many market players already poorly positioned for good news it is less likely to occur.
Have a good evening. I'll see you Friday.