Market players were looking to be optimistic about the upcoming G-20 meeting between Trump and Xi but the Wall Street Journal is reporting that President Xi will demand that the ban on sales to Huawei be ended and that tariffs be removed before talks can resume. That is a high hurdle and raises doubts about how productive this meeting will be.
In addition to the trade negotiation issue, Boeing (BA) , the Real Money 'Stock of the Day', disclosed additional software issues with its 737 Max, and was indicated down about 2.5% in the pre-market.
Despite the negative news, the indices are still indicating small gains to start the day. The S&P 500 has had a four-day losing streak and is now a bit oversold. It sill has solid underlying support at around 2907 before it falls into a gap.
On Wednesday traders were enjoying themselves with some wild speculative action in Bitcoin. After the close of equity trading, Bitcoin plunged from around $13,800 to $11,800 in a matter of minutes. There was a bounce overnight to $13,200, but it is back down around $11,800 this morning.
That sort of volatility in Bitcoin illustrates how it is more than just a trading vehicle without any intrinsic value rather than a new asset class. I expected to see a very high level of speculation continue and would not be surprised if it made another run over recent highs sooner rather than later.
Unfortunately, we are in an environment right now where market players are groping for a catalyst that will help clarify a trend. The technical condition of the major indices is still quite positive and the four days of weakness are not bad enough to be unhealthy.
The bears are grumbling loudly about weak economic data, a Fed with limited ammunition and the unlikelihood of a trade deal with China, but the risk of some surprise news is preventing them from being overly aggressive. The chances of more dovishness from the Fed or something positive on China could set up a bear trap so rather than aggressively short the market the better alternative is to take a neutral stance and see what develops.
It is a tough trading environment right now primarily due to the lack of strong emotions. There are some strong opinions about where things are heading but there isn't much movement on those opinions.
My game plan is to continue to manage my existing positions very tightly and not allow losses to build. I'll also continue to look for new buys but will be very selective as upside momentum is very tough to find.