Trade Deal Jitters

Here we go again.  Wax on, wax off.  Deal on, deal off.  With a surging SPX, going up almost every day, I guess Trump thought he could afford to pretend to play hardball with Xi.  Suddenly the preliminary talks have been canceled, and then uncanceled by Kudlow.  What a sh*t show. 

Xi is seeing right through Trump's Art of the Deal games.  Xi will promise the world with regards to imports but will be vague and noncommittal when it comes to forced technology transfer and intellectual property theft.  He knows what is important to China and isn't about to make a commitment that bans what China wants from US corporations. 

Xi is president for life.  Trump is probably president for just 2 more years.  Trump wants another 4 years, so he's not going to raise tariffs to 25% on Chinese goods and weaken the US economy just to help out a few US multinationals in China.  There is a lot of posturing going on, but the highest probability scenario is a lightweight deal, lacking specifics, with only cosmetic promises from China to increase US imports in exchange for no tariffs.  The market will be satisfied and then the reality will hit the market a few months later when it realizes that the economy is still weak despite the end of the trade war. 

The first pullback after a blistering rally off a capitulative bottom is almost always a buying opportunity.  Even though I am a longer term bear, I would be tempted to buy this pullback, although its already up 30 SPX points from Tuesday's bottom in premarket trading.  Confirming my gut feel that SPX will break 2700 before there is a good short set up.  It is definitely much preferred to have that short setup while there is either a lot of optimism that a deal is getting done or there is a rumor that a deal has been made.  Even though I know that the global economic weakness is not about a US/China trade war, but about a cyclical downturn that is long overdue.  It doesn't matter what I believe, it matters what the rest of the investors believe, and they believe that the trade deal will revive the global economy.