The most logical bearish argument right now is that failure to agree on a "Phase One" China trade deal will trigger a correction. The indices are extended and haven't even had a minor pullback in over a month. Throw in concerns about a slowing economy, valuations, etc. and the inability to make a China deal seems like an ideal negative catalyst.
So far this thesis is not working.
There have been buyers every time there is a dip on some problem with the trade negotiations but how long can that last?
Many market players will be looking ahead to December 15 when the next round of tariff increases are set to go into effect. If they are not delayed that is likely to cause some concern over whether a deal will happen at all.
With the market holding up so well even though this trade deal seems to be stalling I was curious to know what the attitude of investors might be. On Twitter I asked a poll question: Can the market avoid a meaningful pullback if the signing of a Phase One Trade deal drags out into next year?
So far there has been 475 votes with 61% saying "yes" and 39% saying "no."
I expected to see a more equal split in the vote, but it seems that many market participants have been convinced that underlying support is just not going to go away anytime soon. That certainly has been the pattern and has been the smart bet. However, if you are a contrarian then you have to wonder if there is too much confidence.
Regardless of how you feel about this question, one thing to be aware of is that this high level of bullishness makes it make more likely that the downside action will be sudden and quite sharp if and when it does occur. There will be more folks poorly positioned and when they go to adjust the exits will be crowded.
I'll update this poll Friday and see if there is a shift but price action is good and most people are still optimistic. The December 15 date will likely prove which side is correct.
I need to have a vision checkup and will be back later with closing comments.