January Bear Raid

We got the oversold bounce last week, as a lack of bad news and with most of the big players gone, pension fund rebalancing was able to squeeze shorts into the close and get the market to a more neutral level. 

I am bearish for January as I expect economic data to start coming in weaker and more earnings bombs like Fedex coming down the pipe for later in the month.  While there may be a bit more of a bounce going into the first few days of January as asset allocators come back and add equities, the force of the fundamentals will eventually come to bear on this weak market.

I have seen a lot of articles and CNBC guests saying that the economy is still strong and will only slow down a little for 2019.  That is counter to what the stock and bond markets are saying.  I am hearing things like there will be no recession and that markets are panicking and being irrational.  This only tells me that many investors are still in denial and poorly positioned for 2019 equity weakness.  When the economic weakness is more obvious, most of the down move will already have been made, and it will be too late to short stocks. 

This game is about forecasting what will happen based on fundamental and market analysis, not looking at data in the recent past and extrapolating that into the near future.  I've seen a lot of statistical studies that say that in the past, under current oversold conditions, the market went higher 90% of the time.  They forget that the sample is curated from mostly a roaring bull market, or at the very tail end of a bear market. 

Don't forget the S&P was at an all time high less than 3 months ago.  Robots and quant strategies can adjust to current conditions much faster than humans, who still are framing stock price behavior from a bull market perspective.  Thus you get traders quickly embracing any rebound as a tradeable rally, like CNBC Fast Money on Friday, when in fact most of the rally is over with and quickly about to turn back to more selling. 

I have sold the remaining long SPX position today on the gap up off the Trump trade deal optimism and will look to short any rally in the coming days.  Anything around SPX 2525 on the short side should provide a good risk reward. 

Happy New Year and Good luck in 2019!

2018 Rhymes With 2000

Wow, I am still surprised that the GDP forecasts are still over 2.5% for 2019.  The economists are still looking at the rear view mirror in forecasting the future.  We just hit the peak of the economic cycle and apparently they've forgotten how the business cycle works.  GDP growth is not a steady ascent to higher highs, its a roller coaster that eventually goes higher due to underreported inflation numbers and productivity gains at the margin.  Mostly underreported inflation numbers in the last 20 years. 

The financial markets have spoken, and the Eurodollars market is pricing in no rate hikes for 2019 and rate cuts for 2020.  While the economists with no skin in the game and with huge rear view mirrors to stare at, are forecasting 1 or 2 rate hikes, just because the Fed dot plots said so.  You can't make this stuff up.  They have short memories.  They forget the Fed forecasting 4 rate hikes in 2016 at the end of 2015, and managing to hike just once at the end of the year, only after Trump got elected and promised a huge budget buster package of tax cuts and a surging SPX. 

Stocks don't lie.  The financials and other economically sensitive sectors are the worst performers this year.  The earnings guidance in October were screaming to investors that the earnings cycle has peaked out.  Yet too many are still believing the Wall St. and economist forecasts, and trusting the small data mined sample sizes where stocks rallied after huge selloffs. 

SPX April 1991-April 2001

SPX December 2008- December 2018

Here is what happened from April 2001 to April 2003

Is that a preview of December 2018 to December 2020? 

Economic cycle and Fed funds rate peaked in 2000, same as 2018.  We had a massive tech bubble in 2000, similar to what happened with FAANGs in 2018. 

It probably won't be as bad as 2000-2002, but looking at the big picture there is still a lot of downside ahead. 

I sold some SPX longs at the close yesterday, and will dump the rest on the next strong rally, probably next week.  I will buy back what I sold today at the close if SPX goes down to 2400 or lower. 

Scorched Earth

It has been so long since we've pricked a bubble.  2007 was not a bubble.  2015 was not a bubble.  2000 was.  2018 was. 

Post bubble markets seem much less rational because the bubble itself was irrational.  SPX over the last 3 years.  That is a big rally and a big correction.

Let's look at the SPX Price to Sales ratio for the last few decades. 

The price to sales ratio exceeded even the dotcom mania top in 2000.  Yes, corporate tax rates and profit margins are higher now, but profit margins fluctuate with the business and political cycles.  It would be difficult for these profit margins to sustain forever given populist uprisings globally. 

Yes, we've gone down quite a bit from the October top, and we are due for an oversold bounce, but valuations will not be supporting this market on the way down until you get closer to SPX 2100.  It is not as friendly of a monetary environment as the last time SPX was at 2100, in 2016.  There is tighter money and higher interest rates.  On the plus side, there are lower corporate tax rates.  If you say those two factors even themselves out, then a move back to 2100 would be reasonable.  But unlike 2016, we are currently on the down side of the business cycle, not the upside.  So that should also be considered a negative for the market. 

If we have a protracted, slow decline with many bear market rallies, then the bear market can last until 2020.  If the decline is sharp and steep with few bear market rallies, then the bear market will be over in 2019.  I am leaning towards a protracted bear market with the decline slowing down and flattening out in the first few months of 2019, as the economy will take its time slowing down.  This will give false hopes that the economy is not so bad and about to bottom, but the business cycle has turned, and that will last longer than a few months. 

I expect (hope?) a holiday week bounce after the vicious selling last week, and most of the fund liquidations for 2018 should be finished by now.  There will also be pensions looking to rebalance from bonds to stocks this month as the ratio has gotten quite skewed this month.  I am hearing $90B from bonds to stocks for pensions.  Anyway, Trump's desire to fire Powell and Mnuchin's panic reaction are putting downward pressure on the SPX futures here.  This downward pressure should dissipate as the day goes on. 

This is Not 2015-2016

I see some past data-centric players note the bearish sentiment, put/call ratios, drop in oil prices, renewed Chinese fiscal stimulus, and immediately assume that the current market is similar to late 2015/early 2016. 

But they forget the big difference:  the bond market.  This time 3 years ago, Yellen finally raised rates for the first time in seemingly forever and oil prices were plunging, with high yield credit spreads blowing out, but Fed funds were only at 0.25-0.50%, not 2.25-2.50%.  2% is a huge difference for such an overleveraged global economy.  And US rates affects a huge portion of the global economy via LIBOR. 

Another big difference is the current valuations.  Price to book and price to revenues are still higher than every period except the dotcom bubble era.  Price to earnings ratios are not so high, due to the tax cuts and the high profit margins, but corporate tax rates will be an easy target for the next Democratic president.  Investors assume that the corporate tax cuts are something that will last forever.  With the size of the budget deficits, and the projected increases in the future due to entitlements and an aging demographic, there will be pressure to find tax revenues, and with growing populism, corporations will be an easy target, even with the huge lobby base that they have installed in Washington. 

This time around, China is in an even worse financial position, having pumped out even more debt to keep the economy going the last 3 years, and they don't seem as keen to repeat the process this time around. 

From a cyclical perspective, this is even later cycle as we never got the recessionary flush and renewal in the past 10 years.  And the Fed chairman is Powell, not Yellen, so money will be tighter. 

I am seeing more of a 2000-2002 bear market scenario here, and will trade accordingly in 2019.  By the summer of 2019, it will become clear to everybody why the markets have been going down.  Of course, prices will be much lower at that point.  Now many are still confused as to why the market is dropping so hard even with strong wage growth and decent GDP numbers.  So there is still a lot of opportunity on the short side on bounces. 

Powell Pow

That was quite the uppercut from Powell to the jaw of the bulls.  The market was expecting a bit more optionality on stopping the balance sheet runoff but he blew that out the window dismissing the question with the word autopilot.  In a normal market, the reaction would have been subdued.  But this is a super nervous market in the middle of a waterfall decline.  Any slighht hint of hawkishness was going to cause massive selling.  Plus the expectations were too dovish, especially considering that the Fed is backwards looking and the data still hasn’t deteriorated in the US.

Unfortunately, I got back in too quickly after selling on the run up to the meeting, and am stuck with the long at bad levels.  But today’s price action, volume, and put activity is typical of a flush out bottom.  I am not sanguine about the markets like a lot of deluded bulls and underwater longs.  I know I will have to get out on any year end rally and will do so if Santa happens to show up next week.  I expect further selling in January, so I will not be overstaying my welcome on the lomg side.  Really best case scenario now is a move back up to 2600, but more realistically, a target between 2550-2580 is more likely.  Get out of this bad trade next week and move on to the next one.

Of Mice and Men

Wow, the best laid plans... didn't quite go as planned.  We got the short term capitulation that I thought would wait till January, and the pressure from funds liquidating stocks was too much to overcome the seasonal tailwinds with the Fed meeting this Wednesday and opex Friday, with Christmas next week.  Getting down 70 SPX points, less than one trading day after entering is just horrible timing.  But at least we got the panic and cleared out a lot of weak hands.  I wasn't thinking about holding past Wednesday, but with the beating this market has taken, holding for a year end rally from here is getting to be a high probability scenario. 

The volume was heavy yesterday and the put activity was rocking, so there was definitely some panic out there.  That last drop towards SPX 2530 was scary, and I don't think I'm the only one who felt that way. 

The long that I am currently holding is just a trade, I am definitely hesistant to hold it past the end of next week.  If somehow there is a move towards 2620-2630 before the FOMC meeting, I will trim there, and look to buy back after the FOMC announcement, to hold for a few days into the Christmas week slowdown, which should be beneficial for the bulls. 

The expectations for Powell to rescue this market is still there, so if we rally into the announcement, I see room for a selloff right afterwards, but it should be brief, because of yesterday's capitulation clearing out a lot of the forced sellers. 

Being even one day early catching falling knives in this sick market can't get your hand shredded.  With the European close behind us, most of the pre-FOMC meeting sellers should be finished.  Still feel nervous holding an SPX long under the current environment, but it is the high probability play.  I am not expecting a big rally into year end, perhaps a move to SPX 2670-2690.  A lot of resistance at that level, so I would look to short there for a move lower in January. 

Complaints are Getting Louder

When the Fed was raising rates earlier this year and the market was still in an uptrend, there weren't too many complaints about Jerome Powell and his relatively hawkish stance.  Now that stocks are in a downtrend and there is more pain, the Fed critics are growing louder.  They want the Fed to back off, and by doing so, they think stocks will go up.  Even famous investors like Stan Druckenmiller are begging the Fed to stop rate hikes and balance sheet contraction.  Its interesting that his employee, Kevin Warsh, is also a co-author of the article, as if to give the opinion piece more "cred". 

It used to be common opinion that Kevin Warsh was a hawk, but apparently hawks are an endangered species at the Fed, as deep inside, they are all doves.  There are no benefits to being a hawkish Fed governor.  All the Presidents want a dovish Fed chairman, so the easiest way to get the top job at the Fed is to be a cooing dove.  That is Neel Kashkari's strategy to move up to the top, although he has looked foolish  begging for the Fed to not raise rates for years and then relenting this year as the data started coming in hot, only to backtrack now that its fashionable to be dovish again. 

The begging and complaints have done their job, as Powell has now clearly gone from hawkish to dovish as the SPX melted down in October, and convulsed into a high volatility mess in November.  Now everyone is expecting a dovish hike this Wednesday.  The crowd is right, that is what is going to happen, but they are wrong about what that means for the stock market.  Stocks will not go up just because Powell is talking like a cooing dove.  He will need to stop the balance sheet contraction and start cutting rates to actually catch the market's attention.  Stopping is not enough at this point.  Eurodollars pricing out the 2+ rate hikes from early November to now only pricing in less than 10 bps on hikes in 2019 hasn't been enough to get stocks to rally.  A move from 3.25% to 2.82% hasn't been enough. 

Over the next several weeks, this market will be feeling the pressure of a slowing economy but a Fed that is still in a transition from rate hikes to pausing.  The market wants it to go straight from rate hikes to rate cuts.  A Fed pause isn't good enough anymore.  It is mostly priced in anyway.  Unless Powell comes out and surprises the market with an announcement to stop balance sheet contraction and saying that the Fed is now at neutral, you will not see a sustained rally. 

I got long SPX on Friday near the close, but its only a short term trade.  I will not be sticking around beyond the FOMC meeting.  This a long term shorter's market, and that will be my approach after this trade is closed out. 

Small Window for a Rally

With less than a week till the much awaited FOMC meeting with the now expected dovish Powell, there is a small window for a rally to form as we are now on trading day #8 of the downtrend since the market topped on December 3rd on US/China trade truce euphoria.  That is enough time for investors to have reduced their equity positions, and there is evidence that mutual funds & ETFs have had huge outflows over the past week.  Emphasis on small.  It is a dangerous market to be long for more than a few days.  This is only for the nimble, not for traders with much longer time frames.  

This should set up a short term tactical opportunity to buy weakness today to sell into any rallies next week ahead of the FOMC meeting.  Traders are probably getting adjusted to the new pattern now:  Bottom a few days ahead of a big event (October 30, ahead of midterm elections a week later, November 23, ahead of G20 meeting a week later), and rally strongly into the anticipated event and then have one last euphoric rally for a day on the news and lifting of uncertainty, only to sell off like a screaming banshee afterwards.  

So I expect traders to add back to equity exposure next week, expecting Powell to give the market what it wants, and I am sure short sellers will also be actively covering to get flat ahead of Powell, wary of getting squeezed again on a big event.  Its all game theory and psychological warfare, the fundamentals are crap, the only way to make money on the long side is to play the hot potato game, and pass the potato before it burns your hand.  

Looking to buy SPX today, to hold into the FOMC meeting, and sell right before the meeting.  

Same Price as a Year Ago

The SPX has chopped its way towards the same price level as it was on December 12, 2017.  So here are the differences between a year ago and now:

1) Fed funds rate was at 1.00-1.25%.  Now it is 2.00-2.25%. 
2) 10 year yield was at 2.40%.  Now it is 2.89%. 
3) Investors were looking forward to Trump tax cuts and double digit earnings growth.  Now we are looking at peak earnings and poor earnings guidance from tech. 
4) Shanghai Composite was at 3300.  Now it is at 2600.  Eurostoxx 50 was at 3600.  Now it is at 3055. 
5) Investors were bullish. Now they are bearish.
6) Global growth was entering its peak.  Now it is clear that global growth is going down. 
7) There was still central bank balance sheet expansion (BOJ, ECB, Fed) in December 2017.  Now there is central bank balance sheet contraction. 

If you just look at the above changes from 1 year ago, would you expect the SPX to be at the same price?  No, you would expect the SPX to be lower.  There is a delay in investor reaction towards fundamental changes.  That is why there are long term trends.  Because investors take time to react to changed fundamentals. 

The most common argument I hear from the bulls is that economic growth is still strong and that there are no signs that we are going into recession.  Also, the next most common argument is that everyone is bearish and that usually means stocks go up in the intermediate term.  As I mentioned in my last blog post, that is looking in the rear view mirror.  This is not the same market as the one we've had for the last 40 years.  Valuations are clearly in the upper range of the last 40 years, and that in of itself makes the market more vulnerable to any signs of slowing earnings growth. 

We have another strong gap up today.  I expect the market to hold the gap up today, as usually 2 straight gap and crap days are not common, and it seems like the bulls are quite eager to try to catch the bottom and the Santa Claus rally.  I am waiting and watching for better opportunities.  I don't see anything great at the moment.   

Looking at the Rear View Mirror

The history of Wall Street is shorter than you think.  The S&P 500 was created in 1957, and the S&P futures were first traded in 1982.  It is difficult to get a statistically significant result from small sample sizes, and all the numbers are biased because you are making the basic assumption that the past 30-40 years of data are a good representation of the current market environment.  

It just happens that the US stock market has been in a huge uptrend since 1982, benefitting from 1) a dramatic decrease in the risk free rate as Fed funds rate went from 19% to the current 2.25% level.  2) a huge increase in profit margins as mergers and acquisitions fever hit Wall St., eliminating a lot of competition, and limiting wage growth.  3) a big increase in productivity thanks to technology.  That has stalled out over last several years.  4) a big increase in US stock market valuations.  5) A big decrease in both personal and corporate tax rates.  

I would argue that the future will be much less stock market friendly than the past 30 years because most of what I mentioned above will not be repeated.  The rise of populism is already happening under the current corporate welfare and income inequality regime, if that were to continue for much longer, there will likely be a revolt from the suffering masses.  

Yes, there are a lot of statistical studies out there that look at performance after oversold conditions, December seasonality, the year after a midterm election, etc.  Not only are the sample sizes biased, since they were mostly taken during a huge bull market, but number of cases is too small for it to be statistically significant.  You need hundreds and thousands of cases, and throughout all kinds of market environments, not just the past 30-40 years.  Even going back to 1900 isn't enough because that level of economic growth is not possible with the current level of population growth.  That is why you have to take most of these statistical studies with a grain of salt, they just aren't meaningful.  

We had a nasty selloff on Friday and sentiment is getting more bearish, but its been only 4 trading days since the top made last Monday.  Usually these selloffs last 5-6 days at the minimum, and since this is such a weak market, I would lean towards selling off more than expected, as that has been the tendency since the September top.  The market tone is vastly different (less time to sell the highs) than even February or April of this year when the market went lower.  Waiting for a capitulation under 2600 this week for a short term buy, or short next week if we rally above 2700 into FOMC on Dec. 19.  

Long Term Sentiment is Shifting

The bulls are now the traders.  It used to be the bears who were the traders, but now the bulls are the ones who are looking to get their points and get the hell out of the battlefield.  You saw what happened after the midterm elections when the bulls (including me, a temporary bull) were looking for a bigger, longer move higher, like what happened almost EVERY time after a V bottom from 2009 to 2018.  But look what happened on Monday, and what happened in the week after the midterm election rally.  It was a bull bloodbath.  

There are a lot of dead bodies above, and they haven't been able to unload the bodies on the bigger suckers on rallies, because the rallies have been so brief, and the market reluctant to trade for a long time near the top.  

And what used to be reliable reversal signals off of high put/call ratios and oversold readings have not produced the same type of rallies.  These rallies have petered out much more quickly, and the reversal off the tops have been much quicker.  There is a clear change of character that is much more deeply fundamental than trade war and Fed headlines.  Weaker earnings based on 1) slower GDP growth and 2) higher wage growth are starting to weaken the earnings outlook for 2019.  That was the fundamental backdrop for the beginning of the 2000-2002 bear market.  This is a similar situation.  

Earnings growth was the main driver for the bull market from 2009 to 2018, not QE.  Just look at Europe, who hasn't been able to get the same type of stock market gains despite doing a massive QE itself.  With lackluster earnings looking like a foregone conclusion for the next few quarters, the bulls no longer have the earnings growth tailwind at its back.  At current valuations, the bulls are now the ones fighting the uphill battle with fundamentals, not the bears.  Even at the current level of SPX 2690, you have a trailing P/E for the SPX of 21.7.  That is a lot to pay for low growth.  

What I am hearing from bulls to support their case are tactical, not fundamental.  Year end rally, bearish sentiment, oversold readings, etc.  It is quite a change from the more fundamentally derived arguments that bulls made earlier in past years.  With such weak earnings guidance from the tech companies, the bulls can no longer talk about company fundamentals as a positive catalyst anymore.  It is now just about investor positioning, sentiment, and technical analysis.  

We have a bit of a positive mood after the closing rally yesterday.  I don't think the selling is done, and would expect more weakness within the next couple of days, but I am not trading it yet.  Will wait for an easier trade as we get closer to the FOMC meeting.

What Happened with ES?

That is what inquiring minds want to know.  On the Wednesday reopen, you had the oddest non news related dump in ES futures that I've ever seen.  That includes the volatile times of the fall of 2008.  And the fact that the ES still can't trade much higher from those flash crash lows of 2649.75 tells you a lot.  The Asian and European markets were heavy.  You cannot blame algos for that, no matter how hard you try. 

I know there was some Huawei news that came out before the reopen, but are you really going to believe that's why someone dumped 20000 ES contracts?  Really?  No, someone really wanted to get out of his ES long position, and was willing to liquidate into an illiquid market to do so. 

One thing is becoming increasingly clear:  bull market is over.  Not everyone agrees with this, but that's where the opportunity lies.  If everyone agreed with what I thought, there would be no edge.  So if that is the foundation of every trade going forward for the next several months, then here are a few trading ideas:

1) Short SPX after good news is announced, especially after uncertainty is lifted.  This is what would have been great shorting opportunities on the day after the midterm elections and the day after the G20 deal.  The next opportunity is the FOMC meeting on December 19.  The only fly in the ointment for that event is that most traders will be viewing that as a positive catalyst, expecting a dovish Fed, and a repeat of the stock market reaction of last week when the SPX surged on Powell's dovish words.  It will be trickier this time because the expectations will be that much greater.  But I still expect a pop, but a drop will probably come quickly. 

2) Put on a 5-30s curve steepener.  The most bullish part of the yield curve is the belly, especially the 5 year portion.  The 5 year is sniffing out the end of the rate hiking cycle and is running with it, leaving the 2 year and 30 year behind.  Since the Fed reacts late to markets, there will still be some portion of a rate hike priced in 2019, but I expect that continuing equity market weakness will continue to lower those rate hike probabilities, which will benefit the 5 year the most.  But at the same time, Treasury supply continues to be massive, and there is still QT, so the 30 year should still continue to trade heavy.  So from a risk/reward basis, rather than putting on an outright long bet, a curve steepener is preferred. 

3) Don't BTFD.  That is not going to work when you have downtrends that last several weeks, not just a few days.  October was a preview of things to come.  With central banks now a net seller of bonds rather than a buyer, there just isn't the liquidity to lift stocks higher after a few days of selling. 

4) Focus on shorting during stock buyback blackout periods.  The next stock buyback blackout starts in late December, going until late January.  Ahead of what is probably going to be more gloomy earnings news, investors should be aggressive sellers in January. 

5) Don't be a contrarian.  This is related to BTFD.  When investors are nervous, they sell and keep selling.  The sentiment will be bearish.  Instinctively, many counter trend traders will view that as a sign that the trend will reverse soon.  Yes, in a bull market, that's true.  In a bear market, the selling keeps going beyond what most expect.  Stay with short trades longer than usual, and sell your long trades quicker than usual. 

Bear Market Action

Bear markets don't give you a lot of time to sell the highs, and that is what has happened when the SPX has gone above 2800 in each of the last 3 face ripper rallies since October.  In bear markets, if you hesitate, you miss the top.  

As I have mentioned before, fundamentals are the long term driver of stock prices.  Not investor positioning, not headlines, and definitely not technical analysis.  The October earnings reports gave you an in your face hint that earnings are slowing, and the FANGs got punished for it.  What do you think investors will do during stock buyback period starting in late December and lasting into end of January?  Wait for earnings to sell?  No, they will be selling ahead of earnings, which we know are going to be bad (at least those who don't have their heads buried in the sand).  

But this market is so weak, much weaker than the late 2015/early 2016 market, because at least those markets gave you a lot of time to sell the highs, and the rallies lasted several weeks, not several days.  Also, you had much more loose monetary policy back then along with lower valuations.  If I am a long, give me monetary stimulus over fiscal stimulus every time.  

So now that we're back to pre G20 levels, I am not so eager to look for a short, but I am definitely not looking to get long either.  It is hard to sell weakness because of the threat of a face ripper like we had last week, but if you hesitate in getting short (like I did), then you will often miss the golden shorting opportunity.  

I am hoping for a Fed rally sometime in the next 2 weeks when Powell speaks again or at the FOMC meeting.  That will be the time to get short and ride it down into late January.  I am not interested in the long side.  

As for bonds, I expect curve steepening, in particular, the 5-30 part of the curve.  Given the bearish stock market conditions, I don't expect the Fed to hike more than once so that should benefit the short end much more than the long end.  

Trade War Isn't the Problem

The market has gotten myopic about 2 things:  the Fed and US/China trade war.  As traders and investors are apt to do, they forget the big picture and focus on the latest headlines.

A couple of weeks ago, before Powell opened his backtracking mouth, the market was worried that the Fed was going to tighten until something breaks and that there would be no resolution to the trade war.  Fast forward to now.  Powell is now seen as being dovish, and wary of hiking more than 1-2 times, and the US/China trade war is looking to be resolved in a market positive way.

What Powell has done is not enough.  He has already broken something, and people don't realize it.  It just happened to be something outside of the US.  Global short term dollar funding is based on LIBOR, and the move higher that it made from November 2017 to April 2018 is what broke the camel's back.

Unless Powell decides to cut rates and totally reverse what happened from January to May, he is coming up too little, too late.  He has already pushed down global growth just as the Chinese 2016 stimulus was wearing off.  And that growth won't be coming back for a while, unless China decides to throw the yuan under the bus and do another massive fiscal stimulus while the Fed is still reducing its balance sheet.  That probably won't happen unless things get really bad.  

On trade.  It was probably the most hyped up wall of worry this market faced since Brexit.  And as we all know, that is a nothing burger.  The amount of the tariffs is so small, and the threat of it actually going higher was so tiny, that I was a bit surprised that people were actually worried about a bad outcome at the G20.  Trump telegraphed what he was going to do in early November, and people ignored it.  He wanted to do a half-ass deal, calm down the rhetoric, and make the stock market happy.  He accomplished all those things.  Earnings aren't slowing down because of Chinese tariffs.  It is slowing down because we are late cycle and the central banks are not stimulating anymore.  It has nothing to do with the trade war, no matter how many times the so called experts on CNBC keep babbling about trade war as hurting earnings and "visibility".  BTW, anytime you hear the word visibility on a conference call, sell the stock.  Its only mentioned when revenues are going down and they don't want to say it, instead saying they have less visibility.  A euphemism for the crap is about to hit the fan.  

We have a monster gap up and I have sold longs and waiting for a spot to get short.  With Powell testimony probably coming up on Thursday (Wednesday is a holiday), the market should rally into it, as he is now considered a dove and a bull catalyst.  After he is done, it should be time to short as long as SPX is above 2800.