It looked like it was turning into another day of melt-up gains as the lame jokes about a market that would never go down circulated on Twitter once again, but a headline that tariffs on some China goods would remain in effect through the presidential election shook things up.
What was most interesting about the news headline was that it wasn't anything new. Tariffs never were going to be eliminated until after the next stage of negotiations, but with the market grossly overbought and technically extended, the headline was a great excuse to do some selling.
There was a bounce after the initial selloff, but the indexes ended up closing near the lows of the day. Breadth was positive with about 4,000 gainers to 3,400 decliners, but there was some increased volatility Tuesday that indicates that traders are starting to wonder if it's time to be a bit more cautious.
Apple (AAPL) finally turned down and dropped 1.35%, which is its biggest loss since 1.4% on Dec. 9. That is a good illustration of how lopsided the market action has been lately. The stock is still highly extended, but you can be sure there is plenty of dip-buyers that are anxious to jump in.
JPMorgan Chase (JPM) and Citigroup (C) faded in the afternoon, following their earnings report, but still managed solid gains. Wednesday we have reports from Goldman Sachs (GS) and Bank of America (BAC) . It will be instructive to see what sort of momentum they will be able to generate on good reports.
Also Wednesday is the official signing of the China trade deal. That may cause some algorithm action, but it is not likely to be a major event, unless there is some new development.
The indexes are still extended and in need of rest, but momentum is strong and underlying support is good. The market is not likely to suddenly collapse in the next few days.
Have a good evening. I'll see you tomorrow.
