During the Oct 11 Oval Office press conference in which Trump announced the Phase One China trade deal, he mentioned the words “40 or 50 billion” seven times (five times in the first two minutes alone.) He encouraged farmers to “go and immediately buy more land and get bigger tractors.” In addition, an agreement was supposedly reached regarding structural agriculture issues, currency, foreign exchange, technology transfer, etc.

It was a joyous moment, except that no one in the room can be seen smiling. Not one. Though Trump used the word “deal” six times, the Chinese vice premier studiously avoided mentioning the word, saying only that “we have made substantial progress in many fields” and “we will continue to make efforts.”

The only problem? It was total bullshit – not that the algos cared. Stocks broke out of the bearish Head & Shoulders Pattern they were completing and raced out to new highs. Ever since then, ES has been locked in a tight acceleration channel which is gaining about 5 points per day, almost 1% per week.

Trump’s most notable quote from the press conference was the following non-sequitur:

Every time there’s a little bit of bad news, the market would go down incredibly. Every time there was a little bit of good news, the market would go up incredibly. And, yet, other news, that was also very big, the market just didn’t really care. They just seemed to care about the deal with the USA and China. And, that’s okay with me.

It was his acknowledgement of what we all know: markets are responding to “news” of the deal which is very clearly not yet a deal — 629 days since the “trade wars are good and easy to win” tweet:

Trade wars have obviously not been good (especially for farmers who went out and immediately bought more land and bigger tractors) or easy to win. But, it has been easy to ramp the market higher with tweets, chopper talk and leaks to friendly reporters every time the algos got distracted by disappointing economic or earnings news — aided and abetted by a Federal Reserve which is treating current conditions with the same urgency as the greatest financial downturns of the past 100 years.

As we noted yesterday, the market has yet to decide whether to remain in the channel or backtest some important Fibs. Look for oil, VIX and USDJPY to continue calling the shots and for the White House to continue managing the process.

continued for members…

Our daily charts:

ES’ SMA20 is now above the 2.618, so a backtest of the 2.618 remains a good possibility if/when the channel breaks down.

The SPX viewpoint…  A reminder that SPX’s 2.618 is much further away than ES’, which opens the door to potentially greater downside than ES’ chart indicates.

USDJPY continues to sidle sideways, technically broken down but within striking distance of its SMA200. Likewise, VIX is still hanging out near critical support. Yesterday’s pop was easily contained. CL is back above its SMA200 again. And my favorite short, RB, is breaking out with an eye toward its SMA100 and/or SMA200. The 2s10s continues to signal more downside, but it hasn’t gathered much downside momentum yet.UPDATE:  10:30 AM

On the brink of breaking down…

This is the red channel doubled…Looks like it wants to break down, but CL and USdJPY have clearly not received the memo.

UPDATE: EOD

The damage was kept to a minimum, primarily by CL.  VIX and USDJPY didn’t do much, so I believe the idea is to postpone the next leg down and not prevent it all together.  ES’ 2.618 still looks like a good target.  But, I wouldn’t be shocked if it took a whole week to get there.