The indices continue to hold up as market participants wait for the next news headline on China trade.
There are reports that a large Chinese delegation has arrived in the U.S. and that there representatives of the various departments that oversee intellectual property rights in China. Intellectual property issues will be one of the keys to a major deal and that will be watched carefully.
Market expectations for a deal have been shifting as it has become clear that both China and the U.S. expect only a partial agreement at this time. That means negotiations will continue to drag out, but the irony is that the potential for deals is one of the things that help to provide market support. If a deal is done and no issues are left then it can be fully discounted by the market and will no longer provide the lure of some unknown benefit.
I tend to be reactive to market conditions as they change but I do find it helpful to formulate some potential scenarios that may develop. More often than not the market ends up doing what few expect or anticipate. The most logical thing to occur is for some limited deal be made on trade and then for a "sell the news" reaction after a brief celebration.
That scenario seems almost too obvious so it is likely that there be some misdirection before such a move takes hold. If there is a selloff on a trade deal then it will create some interesting potential for various stocks that will be reporting earnings starting next week. Many individual stocks have been hit hard and may not deserve the punishment they have received so there will be some intriguing opportunities.
I see little reason to do much positioning until there is further news flow and a strong reaction. I'll be looking for some index trades on the trade news Friday but will otherwise be mostly on hold until then.
The odds of another trade headline that moves the indices in the next 24 hours is very high but it is akin to playing a slow machine rather than reasoned speculation.