It's not quite finished yet, but the much anticipated China trade deal that delays the imposition of some tariffs was finally agreed upon.
The day started with President Donald Trump tweeting some optimistic comments about a deal that spiked the indexes sharply higher. The indexes hit new highs on the news, but then faded before it was announced that a deal in principle had been made. They popped higher again, but didn't manage to make it back to the morning highs.
Market players are relieved to finally have this uncertainty at least partially resolved, but the big issue now is whether this clears the runway for new highs or will this trigger profit-taking by traders who have been anticipating this positive news for a while.
This is a classic "sell the news" setup, as the market has been running up over and over on any headline that mentioned progress on trade. The deal should have been done months ago, but the big irony is that the indexes are much higher now because the deal was not done months ago. The bulls have been riding trade optimism for a very long time and now we will see if they are going to cash in.
After the close, we have news that a tentative budget deal has been made that will avert a government shutdown and Adobe (ADBE) is seeing a strong response to its earnings report.
One of the positive consequences of having this trade issue finally settled is that we can focus less on overall market direction and more on individual stock picking. Rather than have stocks move in tandem on every tweet or headline about trade, market players will be looking for individual stocks that they can buy to produce some relative performance into the end of the year.
A little "sell the news" action at this point would be a technical positive for more upside into the end of the year. The China trade issue is going to continue for a long time to come, but finally, it appears that there is some actual progress and the market can move onto some new issues.
Have a good evening. I'll see you Friday.