Good…Easy to Win

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.

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