The dip buyers were tested Wednesday, but managed to hold up well.
The indexes were drifting around until around 1 p.m. ET when a headline hit that "phase one" of a China trade deal was unlikely to be completed this year. That triggered some aggressive selling and had the Dow Jones industrial average down around 258 points. News of this sort has typically resulted in some immediate dip-buying. The dip buyers weren't as energetic as on some prior dips, but they recovered 143 Dow points by the time the market closed and keep the loss to just 0.4%.
Expectations for some sort of corrective action have been building lately, but the sellers have been unable to gain any traction. Even the bulls seem to be rooting for some soft action to create new opportunities.
In a different environment, the negative China news could easily cause a selloff that develops into a trend, but in the current environment, market players are so conditioned to buy dips on China headlines that it really doesn't matter what the news might be or what the technical conditions are.
What dominates the current market action is price patterns. Everyone is aware of the price patterns that keep repeating and they act accordingly. The arguments about fundamentals, sentiment, technicals, and a dozen other issues, simply do not matter.
Sooner or later, this will change, but there is no way for us to know when. All we can do is to closely watch the price patterns and wait for them to shift. As I discussed this morning, the first sign of change will be that the dip buyers stand aside. That didn't happen Tuesday so the market remains in good technical health.
Have a good evening. I'll see you Thursday.