After a big move on Friday, the market is due for a rest, but hope for progress on China trade is likely to prevent any major selling. China's Vice Premier, Liu He, is scheduled to arrive in Washington on Thursday to set the groundwork for an eventual meeting between President Trump and Xi Jinping. Tariffs are scheduled to kick in on March 3 on $200 billion of Chinese goods, but if progress is being made that is likely to be delayed.
While the bears have a long list of negatives that they believe will kill the powerful uptrend that started on December 24, the market is still focused on the potential for good news. There was relief that another government shutdown won't take place and not much concern about the political battle over declaring an emergency.
The bears are focused on economic slowing, technical resistance, negative seasonality, valuations and a host of other negatives, but the market simply doesn't care at this point. Most market players are far more worried about potential positive news on China trade than they are about anything else.
If and when a China trade deal is done, we will have to be concerned about a "sell the news" reaction, but that doesn't mean that we won't see another dozen rallies on headlines about progress. The skeptics scoff at how this market keeps rallying on the same trade news, but that dynamic has been consistent and it would be foolish to fight it.
On Friday, there was a bit of shift in the action as banks and oil led, while FAANG names -- Facebook (FB) , Amazon (AMZN) , Apple (AAPL) , Netflix (NFLX) and Alphabet/Google (GOOG) , (GOOGL) -- and some of the bigger-cap technology names lagged. This rotation is an illustration of the fact that market players are still looking to put capital to work and are focusing more on sectors and individual stocks than straight index plays.
It has been a good market for stock pickers recently, with themes like cannabis, electric cars and select biotechnology names doing well. Contrarians may argue that this sort of speculative action is a contrary indicator, but the opportunities are working and that is the key issue right now.
We have some minor weakness this morning as market players digest Friday's outsized gains. With no major news on the agenda, the focus is likely to remain on hopes of a China trade deal.