Market players are intensely focused on the looming tariff deadline on imports from China. There was one very sharp spike on a positive tweet from President Donald Trump and some confirmation from the Wall Street Journal. That spike has been fading steadily for about two hours now. It isn't too surprising that there is some "sell the news" response to the good news that has been so well anticipated for so long.
Getting VERY close to a BIG DEAL with China. They want it, and so do we!— Donald J. Trump (@realDonaldTrump) December 12, 2019
But what is most interesting about the China trade news is that the market keeps rallying on the same news. The computer algorithms, as well as slow-moving humans, are ready to buy the indexes again, should there be more good news.
This tendency to rally, fade and then rally even higher has been driving the bears crazy. We have made a series of new highs, although there hasn't been any real progress on trade. The "phase one" deal was supposedly done long ago, yet we keep making new highs on hopes and promises that some progress is being made.
I started an index short on the spikes this morning and will look to add to that position should we have some more positive spikes on trade headlines. Since we keep rallying on promises of a deal, the great likelihood is that we will sell-off when there actually is a deal.
Of course, we will repeat the whole process when "phase two" negotiations start, but that isn't likely to be any time soon.
The sharp reversal after the spike on good news this morning is going to weaken this market. Traders will be looking at fading strength the next time they have a chance. There isn't much to do but embrace that the indexes are going to continue to dance around to trade headlines until a deal is actually done.