9/22/19 Sunday

Friday saw equities sell off right into the close on news that China’s trade negotiators cut their trip short and headed back to Beijing. It was curious that there was no immediate explanation from the White House designed to calm markets. In fact, earlier in the day a White House trade adviser suggested that if a deal doesn’t come soon that tariffs on Chinese imports could go to 50% or 100%, followed up a bit later by Trump saying that he wasn’t interested in a partial deal.

However, by Saturday Chinese media explained away the decision to cut the trip short and suggested that talks were very constructive, lauded the U.S. move to exempt some 400+ items from tariffs (announced earlier in the week), and sounded optimistic about the high-level meetings scheduled for October.

Hence, equity futures are rebounding from Friday’s dip.

I expect that trade news will take somewhat of a backseat over the next couple weeks as Wall Street gears up for Q3 earnings reports. Expectations are mixed and the market feels very heavy to me at the moment.

The breakout from August’s trading range has been relatively anemic, while negative technical divergences remain on virtually every time frame.

I still, however, see decent odds of a new closing high for the S&P; which could (if not should) come within the next few days. At this point (always subject to change), both the fundamental and technical backdrops offer low odds that it’ll turn out to be anything more than yet another marginal new high that ultimately morphs into what’ll amount to a failed bullish breakout…