After a seven-day run in the Nasdaq and a series of new all-time highs, stocks are poised to take a rest to finish the week. President Trump is imposing restrictions on Chinese social media apps TikTok and WeChat. Also, there is talk about requiring Chinese firms listed on U.S. exchanges to comply with U.S. audit rules. These issues are raising concerns about retaliation and are stirring up simmering trade war worries.
In addition to the China issue, negotiators are failing to make much progress on a new fiscal stimulus deal. The likelihood is that a deal eventually will be reached and that hope will keep a bid under the market.
Monthly jobs news will be reported here on Friday morning but that is already well-anticipated and not likely to have a big impact. The unemployment news has not been a problem for this market and probably won't be again.
The most worrisome issue facing the market right now is that some extended stocks are seeing sell-the-news reactions to earnings reports. Datadog Inc. (DDOG) and Twilio Inc. (TWLO) , which have been leaders off the March lows, are both lower here on Friday morning on good reports.
The market has been increasingly narrow lately with Apple Inc. AAPL offsetting weakness in many smaller stocks. Even the bulls are starting to think the movement in Apple is unjustified, but the momentum is stronger than any logic.
The few times the market has seen some weakness recently it has been very short-lived and led to quick dip-buying. The things market participants need to watch for are failed bounces and lower lows. If the price action starts to shift and selling gains momentum, then it will be time to take quick defensive action.
Under the surface of the market look for speculative trading to continue at a high level. The retail day traders are little concerned about macro matters. They will keep hunting for movement and if they cannot find it then they likely will create it.
This market needs some downside action to stir things up a little and create new opportunities. The easiest mistake to make is to look for a big trend change when there is a routine pullback. It is going to take this market a little time to form the sort of top that will cause real concern.
I plan to stay focused on individual stock picking and will make sure I don't give back too much of recent gains.