The long-awaited "phase one" China trade deal was finally signed Wednesday. As expected there were some provisions that raised the eyebrows of skeptics. In particular, there is a provision that allows a party to withdraw from the agreement if it believes there is a "bad faith" claim and that one side is not complying.
There is likely to be some compliance issues in the future, but it is fairly clear that both parties were anxious for an agreement and are moving ahead to the second phase.
With the indexes technically extended, the signing of the trade agreement was another ideal "sell the news" setup. There was a half-hearted effort to take the indexes down in the afternoon. The mighty Apple (AAPL) finally stumbled a little and closed with a lower low for the first time since early December.
Late day buyers took the indexes off the lows and breadth was still solid with about 4,150 gainers to 3,250 decliners. There may have been an inclination to lock in some gains, but the underlying support remains stubbornly strong and the dip buyers are still ready to jump in fast.
Looking ahead there are two issues that will determine where the indexes are headed. The first is this wave of liquidity that has produced nearly one-way action for months. There are no indications that the Fed is pulling back and they have already indicated support for the repurchase agreement -- or repo -- market for another month or so.
The second issue is whether earnings reports are going to trigger some profit-taking or whether investors be willing to chase extended stocks even higher. Entry points are not easy here, but there are no indications yet that momentum is turning down.
There is some good action in individual stocks and that is enough to justify a bullish stance.
Have a good evening. I'll see you tomorrow.