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Will We Even Get A Trade Pop?

Summary

Many expect a trade deal pop.

Not so sure.

I'll explain why.

This originally appeared here.

While everybody's excited about a trade deal resolution tariffs probably linger making a deal anti-climactic. That can have the impact of sell-the-news when it comes out.

As you know we speak a lot about watching action. So if a trade agreement announcement doens't get the market up immediately then look out, you can to get a big down move.

Jeremy Siegel (no relation) of Wharton said this week that shorts are staying out of the market despite earnings getting worse. He took that to mean that after a potential "5% pop" on a trade deal shorts will come in.

Thinking that through though we don't expect the 5% pop if tariffs linger. If tariffs continue tech and all companies don't get the relief from a trade deal. Without that relief what kicks growth back into gear? Not sure.

So think it through.

You have earnings slowing which heavily weighs on stock prices. The market should be getting hit on that news but traders don't want to be short for an announcement. But they'll be ok with shorting after the news. Then if after the news you don't get the pop everyone expected you then have longs and shorts selling simultaneously. That can create a good news-bad action setup.

I've seen that happen before many times where you expect good, you only get ok, then all the short term people have to get out simultaneously.

We think this trade deal is setting up with contrary risk to the bullish enthusiasm out there.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless. Elazar and its employees do not take individual stock positions to avoid front running and other potential customer related issues.