China what?

The DJIA rallied 396 points yesterday as news spread like wildfire that China was sending a trade representative to negotiate with the United States. While many a perma-bull rejoiced, this kind of headline can cut both ways. 

Now the news cycle and markets are setup to sell-off on any news of the negotiations not bearing fruit or even worse, breaking off entirely. Trade related sell-offs could happen at any given moment, but even more than that, I suspect the market's volatility and, dare I call it weakness, are about more than trade disputes. 

Debates abound regarding definitions and terms as they relate to the market. Is this a trade war or something less? Is the market showing weakness? Is it still a bull market? Bulls like to point to market averages in support of their thesis that the market remains strong. There is no arguing, averages are not terribly far from all time highs, and in fact, a week or so of rallying would smash through them. 

Conversely, bears would contend market breadth is lacking, as many individual stocks have taken a pounding. Seeing so many of the stocks I personally track get clobbered even while averages remain high, has always indicated bearishness from my perspective. Another bearish indicator has been the market selling-off, ostensibly, positive earnings reports; from HUYA to NVDA to GSKY to DBX.  

I'm skeptical that the bull market will continue with or without successful resolutions of the various international trades disputes.  I think the mental trap some traders/investors could get caught in, is a "tunnel vision thinking" that suggests trade disputes are all that stand between the current volatility and record highs. This market has more reasons to go lower than it does to go higher, irrespective of trade. 

It feels like a real leap of faith to go long here, and intend to hold the next 6-12 months. If you are that bullish, more power to you and maybe you are right. Then again, you might be a perma-bull. I know one market follower that wears a doctor's mask and goes by the name of an insect, that is totally a perma-bull, and a vulgar one at that. He couldn't deny either characterization but might claim being so has proven very profitable.

There are times I'm bullish or bearish by conviction. Coming out of the great recession, circa, 2010-11, I was bullish by conviction. Even though the market traded sideways for an extended period of time back then, I felt strongly, when it did break, it would break higher. 7 years of up-markets later, I would be proven prophetic. I'm not bearish by conviction now, yet I remain far from convinced the bull remains intact leading up to the next U.S. Presidential election. 

I like to consider myself a "stock market free agent".  Meaning, on a short term basis, I'm not under contract to either the bulls or bears. Long term, yes, of course I'm bullish, but the question regarding the long term is, are you in the mental and financial position to watch long term holdings get taken to the woodshed? 

I maintain that odds favor shorts, and that the balance scales weigh in favor of a down market. Will continue to make shorter term trades, leaning toward shorts with reasonable stops. If my shorts are stopped, I'll go back long because at that point, the market will have spoken. I will not go long however simply because I'm always bullish and I play for only the long team. SDS pays the same way GOOGL pays when you buy lower and sell higher. 

Fun Fact:  CVNA, a Bluestar draft pick, is not one of the individual stocks trading down. In fact, the used car vending machine pre-owned auto retailer is trading 76% above it's 200 day moving average.