Trade Deal Outline In Place

Trade Deal - Stocks Creep Higher

Before getting into details about the potential trade deal, let's review the stock market. The stock market crept higher on Wednesday as it increased by 0.18%. 

S&P 500 is now up 11.08% year to date. A question traders are asking is whether the market can maintain this momentum until it breaks the September record high. That would be very difficult because stocks are already overbought. 

S&P 500 is slightly less than 5% away from its record. But the CNN fear and greed index is at 70 which signals greed.

The 14 day RSI is at 70.18 which is an overbought signal. Even though almost every stock is above its 50 day moving average, the 50 day RSI is only at 54.5. 9 day RSI is at 76.66 which shows how the market has gone hyperbolic. 

Some claim that the amazing breadth means stocks will move higher. While that’s a fair analysis based on historical trends, this move is highly unsustainable.

Trade Deal - Small Banks Rule The Market

Nasdaq was up just 3 basis points and Russell 2000 was up 0.46%. The Russell 2000 is up 17.29% year to date. VIX fell 5.78% to 14.02. 

It’s always the cheapest to buy protection when stocks are rallying sharply. I think it makes sense to buy protection as I am very bearish on stocks in the short term. 

Best 2 sectors on Wednesday were the materials and financials which increased by 1.69% to 0.58%. Two worst sectors of the year were real estate and healthcare which fell 0.66% and 0.13%.  

My long pick of the year was the KBW regional bank index. It has been an amazing play as it is up 20.26% year to date. 

Full disclosure, my short pick of the year has been a complete disaster as YETI stock is up 43.23%. It has been very difficult to short stocks as even stocks that missed estimates only fell 0.4% after their reports on average. 

Firms which missed guidance are still up. Since Yeti is a small cap which raised guidance, it’s no surprise the stock is on a rampage.

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