In our opinion, both the U.S. and China want and need a “Phase One” trade deal…and thus one will be signed in the not-too-distant future. Not only do both side want and need one, but a significant break-down in the Phase One negotiations would have a devastating effect on both the U.S. & China markets…and hurt both economies…so a deal is definitely probable.
The one problem we have with this scenario is that all investors seem to agree that a Phase One deal is inevitable…and thus have been pricing-in this inevitability already. Let’s face it, any time there has been any new that there were some problems in the negotiations, the stock market has barely blinked. Any dip has barely lasted a few hours, so it seems to us that although a definitive Phase One (signed) deal would be positive, we doubt it will create a further rally of 10% (the way some people think it will).
This does not mean that the broad stock market is going to be hit hard any time soon, but it could/should see a mild pull-back (a "breather"). One development that could provide a partial catalyst for a “breather” would be a pull-back in AAPL. AAPL is becoming very, very overbought on a short-term basis. It's weekly chart is has reached levels on several readings that are similar to the ones that were reached just before short-term pull-backs in the past.
Don't get us wrong, there are fundamental and technical reasons to like AAPL on a long-term basis, but it is getting ripe for a breather on a short-term basis. To see the charts we're talking about...and to get these kinds of insights on a daily basis,please click here to subscribe to my market newsletter, "The Maley Report" (TheMaleyReport.com).
Matthew J. Maley
Chief Market Strategist
Miller Tabak + Co., LLC
Founder, The Maley Report
275 Grove St. Suite 2-400
Newton, MA 02466
Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.