Ample China-trade-talk progress persists as a backdrop primarily retarding the 'heavy industrials' from catching-down with the internals of the broader market, which are neutral at best, and correcting for at least a large portion of smaller-cap stocks, for some weeks now.  

That's actually a 'plus' for the market; because generally it's not 'spiky' or dominated by euphoria, as some bears (or bull-bears as I term their opposition to the rally throughout the year thus far) have contended. It also suggests they primarily desire a set-back for buying purposes.

On top of everything this remains a transition year in technology. That radiates into many sectors that aren't 'perceived' as tech; but a reality in the modern world is that they too are very reliant on it; thus shifts to new technology (like 5G which relates to everything working faster in time with much lower latency being very important component of that) cause very tepid inventory levels and a degree of caution pending that technology increasingly arriving 'on the scene' really starting next year with some infrastructure (only initial elements) beginning this year.  

Hence this leaves us with several prospects looking forward; which in a sense compliments the points made in the last Briefing:

• China talk progress is a perception we had regarding 'wrapping it up' in May; ahead of the President's June State visit to the U.K.;

• Cynicism against the President is only partially justified; makes it tough for governance; but they're getting quite a lot done even if 'some' media pretend otherwise (sure, Trump is rough around the edges at least; but common-sense governing is working; and that means a lot, if not so much for those ticked at property taxes);

• Property taxes (SALT limitations are a significant part of what is becoming a rout), and risks being a collapse, in high-end housing prices; something I've warned coming for almost two years;

• This has been especially severe in New York City, parts of coastal South Florida; less so in the Bay Area only because of the influx of start-up's; but even San Francisco is seeing more outflow of those already there; and now sharp price declines in West Los Angeles (at least hints of that in Beverly Hills and certainly in Malibu);

• Homeowners may blame Trump; the reality is prices were bubbly yet-again; and milenials aren't against home-ownership and you'll see them as buyers 'if' we get true carnage in housing;

• Housing declines are also an inhibitor of higher stock prices; but as money seeks somewhere to go (as I argued in 2006 we had oh a year or so to go the upside prior to my 'Epic Debacle' warning in February of 2007; so money can slosh into the market even thru the Election, but eventually another downward equity cycle;

• Speaking of that, the cycle we're in dates from last December; economic and market internal actual peaks were January 2018;

• I'm noting (because mainstream U.S. media isn't but British are) that Saudi Arabia today executed 36 (mostly innocent) people; of those two are total violations of International Law that make me ill and wonder why the U.S. is so quiet about this (they behead a 16 year old boy for texting a 'What'sApp' message about a protest; as well as a 17 year old for simply mentioning online a protest, before he was to depart for college in Michigan);

• If we an avoid escalation of tensions with China; and not stumble into a war with Iran (they're funded by the release of funds to them in cash by this Country previously as you know); then markets do have a chance to limit pullbacks to being just that;

• The trade Negotiating Team is headed to China this weekend for more negotiations; but the idea of finality coming was aided by the President referring to 'President Xi visiting Washington soon';

• Nobody confirmed that or acknowledged awareness; hence it's a perception (although largely grounded in reality I suspect);

• Again, even though there are twin views about dealing with China, it is reality that 'even if' one believes it impossible to deal with the communist regime, that's not the case as nearly 50 years of doing just that attest;

• During the past decades I have often ranted against undermining American industry by the way policy was maintained with China; however the two nations are so intertwined now that untying it is perhaps a forlorn aspiration;

• Hence finding a middle ground to work in; neither acquiescing to an assumed ascendancy of China; nor confronting them militarily (while maintaining a sufficient presence to somewhat delicately be able to restrain their expansionist tendencies or support ally's);

• In this respect (and with the important comments again today by President Xi of China regarding currency and regulations); China is seemingly moving quickly to making a deal with the USA;

• Besides pledging to modify the BRI to fund only sustainable deals; Xi promised not to competitively devalue their currency (a rather key story supporting Friday's market which was mostly ignored);

• The allegations made against Wall Street and corporate America related to how they pushed for a China deal are not exactly on-point; a topic I reflected on in the morning video and touch on it again in a segment below.

In sum: the market remains at a high level. Yes it's a plateau around the historic highs, at least for the S&P and Nasdaq (not so the DJI).  

The underlying erosion over the last several weeks (small-cap and of course absence of 'buybacks' during earnings-related quite periods), combined with (for now at least) exhaustion of the Oil move into the middle 60's/bbl (which we thought was sufficient with moves higher a response to geopolitical issues, not supply/demand realities), more or less combined to retard the market's ability to push higher.

Downside risks were noted in recent days not just because of recoiling from new highs (not unusual); but also deterioration in underlying SOX action, or Semiconductor demand (and it wasn't just Intel). Lower GDP growth in South Korea probably denoted the tech slippage best; while again some of that should turn-around later this year and next. And it won't be just because the U.S. made trade-deals with China; although there is 'linkage' between demand and new technology progressing.

Meanwhile many domestic mega-cap stocks (FANG simplifies it) are expensive; get hyped based on secondary aspects (faster delivery is an example, as it wasn't bad already); and while it shifts narratives a bit does not generally change valuation levels (as other get reactive).

Streaming video services are another area (often the same players in multiple businesses) that will become increasingly competitive.     

Bottom line: the market wants to hang around these highs (mostly as relates to the S&P) hoping to benefit from China trade deals (imagine the tanking if we don't get it done) and less concerned about inflation, or monetary policy in the wake of a strong GDP. Some of this supports our view that 'if' they ever proclaim a recession it will be nearly over. It has been my view that the majority of contraction was unreported and under-appreciated during last year's rolling bear market corrections; a part of the idea leading into this transition year.  

This also suggests that pauses and/or corrections will occur (should in May) but may be deferred for the Senior Index because of a pensive anticipation of a China deal, whether 'good news selling' follows any spike on that, or not). Meanwhile many stocks corrected for weeks.  

The coming week will require stability in Oil (even Trump helped deter higher Oil; but that might imply he realizes any further tension with the Iranian extreme regime would tend to ramp it right back up); and not too much more retreat by Semiconductors. Earnings may favorably be surprising to some; especially if Apple does real well in 'Services'.