Despite a poor earnings report form Intel (INTC) on Thursday the market had a strong big this morning and traded straight up after a gap-up open. There was some talk about that the Fed may indicate next week that it won't contract its balance sheet as quickly but the main reason for the strength was that market players had sniffed out the possibility of a deal to end the government shutdown.
That deal was announced by President Donald Trump and there was very little market reaction. Nothing much was accomplished as far as the contentious issues but it does reopen the government and ends a distraction that was starting to have a real economic impact.
The market has traded almost straight up since the shutdown began so its tough to argue that it should rally even more on the agreement. This is a classic "sell the news" situation but the indices are holding up into the closing bell.
I suspect with the headline risk of a deal on the shutdown now out of the way the bears will growl a bit. There is unlikely to be anything definitive on China trade soon and we will have a slew of earnings reports next week. The Fed has made it quite clear they are adopting a dovish bias and the government shutdown will actually alleviate some pressure on them to be even more so.
The bearish narrative lately has been slowing global growth and if we do see some downside pressure I suspect that will be the headline explanation that we see.
This strong rally off the December 24 low has caused a surge in bullish sentiment and many have now forgotten the pain of the fourth quarter. There is a chance that the market will continue to trend higher from here but the greater likelihood is that it will experience some struggles soon. I'm not a growling grizzly but I'm skeptical about the market's ability to run higher in a straight line.
Have a great weekend. I'll see you on Monday