Trade Deal Leak

Mnuchin is the annoying kid in the front of the classroom, raising his hand to volunteer to help his teacher, who is Trump.  We got a leak in the Wall Street Journal about Mnuchin tariff cuts ahead of a January 30 meeting with Chinese officials on trade.  Of course, the White House denied it, just like they tried to deny the G20 framework that would be in place to make a later trade deal.  Believe the leaks, not the denials. 

They are folding like a cheap lawn chair, as Xi has waited out Trump masterfully, even as the Chinese economy is deep diving, not giving in on intellectual property or forced technlogy transfers.  He is sensing Trump's desperation to make a trade deal to rescue the US stock market.  The Chinese will agree to a haphazard, nonbinding agreement on various aspects of IP, imports etc. for the elimination of tariffs and free trade guarantees.  Expect the Chinese to keep what they've always been doing, which is steal technology, force foreign companies in China to do joint ventures with state owned enterprises while revealing all their IP, and ignore patents along the way.  Much like the US/North Korea agreement, it will be toothless and all for nothing, keeping the status quo. 

Mea culpa on my prediction of weakness into earnings season.  I underestimated the eagerness of the Trump administration to try to rush a crappy trade deal that accomplishes nothing in order to placate the stock market.  Also underestimated the willingness of fund managers chasing stocks to front run the "pop" on the US/China trade deal.  This big rally all but guarantees a bloodbath after the trade deal is announced. 

We are finally getting acceptance of the rally, and that it will not be going away anytime soon.  It doesn't mean that the rally is over, it just means that the steep part of the rally move is over.  Now there will be more choppy back and forth action, still grinding higher, but with more 1-2 day pullbacks, and no more straight up moves.