08Jan10:37 amEST

It's Not All About China

Perceived progress on the U.S./China Trade War talks is being attributed as a colorable reason for this morning's opening gap higher. As I write this, though, we are well off session highs and putting dip-buyers to the test in terms of whether they remain willing and able to step back in to keep supporting this relief rally. Inside Market Chess Subscription Services, for example, I used early strength to sell the rest of a GLUU long.

One other factor is worth noting regarding the China thesis--If it is "all about China," then why have small caps (domestic smaller firms in the IWM) leading us higher when they have the least exposure to China? 

Without question, the technical backdrop of equity markets remains sloppy, despite some promising signs of late in various individual stocks. Still, we must not forget that the damage suffered in the fourth quarter of 2018 may take a bit longer to heal than we have grown accustomed to over the years. 

At this point, bulls are simply looking for pauses and dips to remain shallow and orderly, avoiding the dreaded violent rollover back down to the Christmas lows on the various index charts. Moreover, seeing some names like TEAM in software take a few days to tighten up now after an impressive rally would be just fine by all accounts for the bull case. Again, the key is avoiding an abrupt, high sell volume reversal lower which quickly erases all recent gains. 

On the SPY 15-minute chart, ETF for the S&P 500 Index, another point of reference is shaping up. Note the fresh channel higher we are printing, with $254 likely needing to hold in order to maintain any semblance of momentum today. 

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