The indices gapped down and have been selling off steadily so far this morning. After the first 30 minutes of trading, there are no signs of bounce buyers or bottom fishers. Breadth is more than 3 to 1 negative and new 12-month lows are slowly expanding.
There is no big mystery about what is happening. The hope that there might be some progress on a trade deal is dropping quickly and that is leaving the market bidless.
The primary driver for the lack of optimism this morning is that the U.S. as added 28 new Chinese companies to a list of names that are suspected of either national security violations or human rights abuses in China. In addition, there is talk that the U.S. may move to limit the ability of government pension plans to invest in China-based stocks.
These two moves are obviously an escalation in the trade war and undermine the hope that there could be some limited deal made on issues that there is already some level of agreement on. Even if that does happen the trade war is broadening to other areas and that is what the big concern is this morning.
So far the selling is unrelenting and there is no choice but to stay out of the way and wait to see if some support may hit. It is highly likely that there will be some sort of optimistic headline on China trade at some point but this market has been burned so often that it is very unlikely to trust the news flow at this point.
I'm sitting on a high level of cash and have no interest in buying at this point.