Ok, so we got the "phase 1" of the trade deal signed which lifts some of the "uncertainty" from the market. I've said it before, this trade war is a fugazi. It's just a distraction/narrative for market participants to pay attention to. Ultimately, it's not going to have a material impact on the economy no matter how it's settled. Major downturns are not caused by this type of silliness. They are caused when a material underpinning of the economy unravels and spills over into other sectors. The US was never overly dependent on China, it's the other way around. Yes, the trade drama can cause significant ST noise but it's all just noise. Another thing that can cause a significant downturn in the market (but not collapse) is when you get too much enthusiasm from the crowd. This creates an overcrowded long exposure making the market vulnerable to a rug pull. A good example was the 1987 and 2018 declines whereby sentiment got overheated and the market had a serious rout with the economy still relatively fine i.e. not in recession.
I would speculate right now that we are in a position where a lot of "pros" and retail as well, are caught flat footed because they've been positioned rather defensively all year. The pros in particular are probably begging for a big pullback, but in such a situation were so many people are caught leaning the wrong way, it doesn't seem likely there will be one. I'm also noticing ST trader types and/or hedgers relentlessly trying to top tick the market because anytime the market shows even the slightest hint of weakness the put/call ratio spikes to 1 or thereabouts. This is creating yet another layer of support as these traders get their fingers burned over and over. You can see it the intraday charts. You can actually see a finger-like pattern in the chart which is indicative of shorts getting squeezed and stopped out. Maybe we''ll see a swift change in attitude shortly but until we do, don't hold your breath for a big pullback just yet in my opinion.
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