The indexes ended Tuesday with sizable losses on very poor breadth, but the most notable aspect of the day was that many market players gave up hope of a trade deal with China that would keep the market running higher.
After moves by the Trump administration to possibly restrict governmental pension plan investment in Chinese stocks and the revocation of visas of Chinese nationals accused of human rights abuses, it seemed clear that the hurdles to a deal with China were growing higher. The argument is that these issues have nothing to do with trade, but obviously they are going to produce some obstacles to building goodwill.
There is still some possibility that there could be some progress on trade, but the market is clearly indicating that it is not expecting there to be anything of great consequence.
There also were some comments by Fed Chair Jerome Powell Tuesday about the Fed buying Treasury bonds. He refused to characterize it as "quantitative easing," but it certainly qualifies as dovish. The market reacted positively at first, but faded fast as some China headlines hit. But the market's lack of celebration over Powell's comments is not a good sign. If the market starts to believe the Fed is running out of ammunition, it is going to become very ugly, very fast.
The indexes closed at the lows of the day, and it puts the recent lows of the indexes clearly in play. The S&P 500 is still well above its 200-day simple moving average of 2845, but with action like we had Tuesday, it may eventually come into play.
We will still have to deal with China trade headlines the rest of the week, but the market lost some hope, and that is what we need to wash out the excesses and move us to a buyable low.
Have a good evening. I'll see you Wednesday.