The market continues to trend straight up, and for the eleventh day in a row the S&P is higher than it opened. That is particularly impressive today as earnings news was lackluster and there was a gap-higher to start the day.
It is likely that the sustained upside is a caused by some optimism that there may be a breakthrough on China trade combined with skeptical market players that still have too much idle capital.
There is a report from Bloomberg that China has offered to spend over a $1 trillion on US goods in the next six year to reduce the U.S. trade deficit but that has been rejected by US negotiators as insufficient.
This sort of news does send the message that there could be a major breakthrough at any time and after that spike yesterday on a headline about trade progress, traders don't want to be caught leaning the wrong way when a new headline hits.
Ironically even the bulls are starting to hope that this market slows downs soon. This is great action if you are longer term and are fully long but it is tough if you are still trying to put capital to work. There is no question that a pullback will occur sooner or later and that better entry points will develop but there is no way to time that with any precision.
I won't even try to describe the frustration of shorts who have been anticipating some sort of pullback for well over a week now. If you have tried to call a top based on overbought conditions or technical levels you have been on the wrong side of the action.
As I mentioned on Twitter this morning, my view on calling a turn is to focus more on 'flow' rather than levels or resistance. What I want to see is a shift in the action. Instead of higher highs, I want to see a market that closes lower than it opens and I want to start seeing strength sold instead of creating even more fear of missing out.
The big issue right now is that hope of favorable news on China is preventing any real selling. Everyone knows if there is some actual good news on trade this market is going to spike higher no matter how extended it is or how much technical resistance there may be. China trade news will trump negative technicals in the short term and that is what matters most.