For many months the main dynamic driving the market steadily higher has been teasing headlines about a potential China trade deal. Over and over again it is reported that a deal is progressing and that helped to drive the indices to new highs. It hasn't hurt that the Fed has been providing "not QE" QE (quantitative easing), but it is the news flow that has prevented the bears from gaining any traction.
On Tuesday it looked like maybe the stories about progress on trade may stall for a while, but Bloomberg essentially reported that Trump was just running his mouth and that a trade deal was still likely by Dec. 15.
With news like that there simply is no choice but to take a more positive approach just in case it happens to be true. Even if you have severe doubts, the potential for a squeeze and some upside momentum is strong after the worst three days of selling since early October.
If you are a reactive trader like me, then you likely have a high level of cash as you have played some defense in the last few days. The challenge is trying to put it back to work in a prudent manner.
I'm out of all index shorts for now and will be focusing on finding good individual chart setups to buy. It is likely that there will be a "China trade" bid under the market as we move closer to the Dec. 15 tariff deadline.