thependulumswings

Friends

As we mentioned after yesterday’s market dip, we are on
headline watch and that a simple tweet can move stocks in either direction.
Well, this morning we got the “Chinese want to make a deal” tweet from the President
and stocks quickly moved into positive territory. As further comments from the
White House seemed to confirm that talks were back on for later this week,
stocks moved comfortably into positive territory. But, the enthusiasm waned and
stocks drifted lower into a disappointing close.

For the day, the Dow Jones Industrial Average was up 2
points to close at 25,967. The S&P 500 was down 4 points to finish the day
at 2,879. Gold was down $4 to trade at $1,281 per ounce, while oil was up $.73
to trade at $62.13 per barrel WTI.

Positive trade headlines have become less and less effective
as more and more doubt creeps into the actual validity of such headlines. On
the other hand, negative headlines about the Chinese trade situation sends
ripples of fear through the markets and stocks seem much more susceptible to
such headlines. Before doubt was introduced into the trade proceedings this
week, it appeared that the stock market was in a position to actually melt up
given the comfortable environment for stocks (employment, inflation, GDP,
earnings and tailwinds), but now it feels like the downside to a lack of a
trade deal is considerably higher than the upside of achieving a trade deal. In
other words, the risk/reward equation appears to have changed this week. Stay
tuned.

Have a nice evening everyone.

Jim