Active market players are on hold as they wait to see what happens next in the trade negotiations with China.
If there is no progress toward a resolution, it is very likely the market will react negatively.
But what if there is progress, or if a deal is actually made?
The bears are practically guaranteed a "sell the news" reaction to news of the deal.
The logic is simple -- the market has been anticipating a favorable resolution for months and the good news is already discounted.
There may be a pop on the news simply due to relief the issue is settled, but the big economic positives have already been priced into the market.
That is pretty straightforward logic and suggests that we shouldn't rush to chase the market on a positive headline.
Of course, logic of that sort quite often backfires. One prime example is how the market reacts to the Federal Reserve.
Fed actions are almost always anticipated, yet the market still rallies on the anticipated news. When the "sell the news" trade fails, it quickly turns into a short squeeze and then FOMO (fear of missing out) becomes an issue. Suddenly the no-brainer setup turns into an uptrend.
I don't know what is going to happen if and when a trade deal is made, but I would not be rushing to load up on short positions right away.
Stay open minded about the situation and see how the price action develops.
If there is immediate selling on a deal headline, it may be a good opportunity for some entries into individual stocks that you favor.
I suspect that we are not going to have a completed deal, but that there will be some progress made and that hope of a final deal will keep the market up for a while longer. There isn't much to do in the meantime while we wait for another bout of volatility.
I'm doing very little today, but I did take a position in Parsons Corp. (PSN) , which issued its IPO today at a price of $27.
Parsons is a profitable company which grew revenues 18% in 2018.
Compared to some of the other recent IPOs, the numbers are solid and that should give it support.