The market's corrective action accelerated on reports that the meeting between President Donald Trump and China's Xi Jinping to sign a trade deal could be delayed until December, as they hash out terms and a meeting place. There was a quick spike down as the headlines hit, but so far the selling is relatively mild. The market still seems optimistic that progress is being made and that a deal will be signed.
This news may help to hasten the corrective action, as they bring stocks down to support levels. It is interesting to note that the gap on the S&P 500 chart that was created on Monday morning was filled almost exactly on the dip following the news. That is precisely the level that technicians would be looking for as the first main level of support.
Breadth has deteriorated and is running about 2,800 gainers to 4,500 decliners. New 12-month highs are running at 220 and new 12-month lows are over 80.
This is still normal corrective action but the bears now have some news to work with, and we'll see what they can do with that into the close. A weak finish Wednesday would likely trigger some stops and give the bears a little greater confidence.
The bull's main problem is that there isn't any obvious positive news catalyst on the docket. The Fed isn't doing anything in the near term and obviously the China trade issue is going to drag out. There will be more earnings reports but none that are likely to be market moving.
The market needed a correction and it is getting one and even has a good excuse for it now. There is risk that this could develop into something more severe, but so far technical conditions remain good.
