The indices are set to open strongly Monday morning, following a tweet by President Trump that he and Chinese Premier Xi, have made "big progress" and are "moving along very well" on trade.
This isn't the first time that President Trump has made optimistic comments on trade. There is some hope that a positive reaction might stick, but there are many headwinds out there and it is likely to be a choppy day.
The more important news is that we are wrapping up a losing year for the indices. What looked like a spectacular year back in January and then September turned into a mess -- and the market is still trying to find its footing. The S&P 500 is going to have its worst performance since 2008, with a loss around 7%.
In recent years, the last day of trading has had a negative bias. Quantifiable Edges notes that there has been a tendency, especially among small-caps, to sell off in the last 15 minutes of trading. This is obviously due to portfolio moves made by institutions to position for the new year.
This market has already been roiled by some huge allocations and portfolio moves, and there are sure to be some reverberations today, as the final moves are made and the books are closed on a disappointing year for the indices.
I've noted quite often recently that this market isn't about stock picking right now. We have been pushed around by big moves in the indices and the merits of individual stocks haven't mattered. When the market undergoes major corrective moves, all stocks tend to move in tandem.
With the start of the new year, we should start to see more focus on stock picking. Market players will be thinking more about what stocks may outperform in the year ahead -- and with the pressure of tax loss selling coming to an end, there should be some names coming back to life.
I'll be posting some of my favorites for 2019 when we return from the New Year's holiday. One group I'll be looking at is biotechnology. It has been hit harder than most sectors and the stocks with some positive catalysts coming up are in good position for bounces.
The important thing to keep in mind today is that the action is more about positioning and portfolio adjustments than news flow. I suspect the strength produced by President Trump with his tweets on trade will be faded and there should be a number of fund managers looking to raise cash before the closing bell. This is unlikely to be a good time to chase strength.