There are lots of leaks that a trade deal between the U.S. and China is near. Why all the leaks? For over two weeks, a new leak is released every few days by the mainstream media that suggests a trade deal is near. Are these leaks sanctioned by the Trump Administration? The better question is should you buy on the trade deal rumors? The most likely outcome is that the trade deal will be a bad deal spun as a good deal (see your Market Trends Journal March 2019 issue).
Volume has been falling into the upward move and the MACD shows that momentum is waning. The RSI is overbought. In other words, the technicals say that you should not buy the market on these trade deal leaks.
The market may have already priced in the positive news of a trade deal as the S&P 500 is up more than 16% from its December 24th low. Worse, we see that earnings growth is slowing in the U.S. According to FactSet, in the first two months of 2019, we had the largest cuts to S&P 500 EPS estimates since 2016 while the market is up 12% over that same time frame:
Momo traders are driving market action and are buying stocks in the first 30 minutes of trade while the smart money is lightly selling into the strength. This is exactly the dynamic that I warned you about last week and in the Saturday Show.