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 ...