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No US-China Trade Deal Is Best Bet For Stocks

Published 04/24/2019, 02:15 PM

Stocks have been rallying since December 26, 2018. The first-quarter rally has been nothing short of amazing. While traders and investors await a US-China trade deal, every few days we hear that a deal between the two countries is getting closer to actually happening.

Watch Your Shorts

Volume trends have been extremely light in 2019, which indicates very little selling pressure in the markets. Contrary to popular belief, light volume actually favors upside in the markets. Hence the old market adage, 'never short a dull market.' At this time, many traders and investors are waiting for a trade deal to be struck by the United States and China. Simply put, nobody wants to get caught short when a deal is announced. All we hear from the financial media is that a deal could add another 10 percent of upside to the market – immediately. So who in their right mind would want to be short right now.

It is probably better that there is no actual trade deal announced in order for stocks to continue climbing. What would happen if the talks between the U.S. and China fell apart right now? That would likely be a big hiccup for the major stock indexes. On the flip side, if a deal is actually signed, we'll probably see another pop in the markets in the near term. Yet after an initial spike, we could be looking at a sell-the-news event. Indeed the markets are rising in anticipation of a deal being announced – very soon.
Shanghai Composite

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