I think the most you can glean from the following is that we're in for a pickup in near-term volatility:
1. Fed committedly on hold for the time being.
2. Earnings expectations are low coming into the season.
3. Share buybacks show no signs of abating.
4. Trump needs a strong market for reelection momentum.
5. Global economic data holding up.
6. Most foreign central banks are on hold as well.
7. Excellent market breadth.
8. Money market balances relatively high.
1. SPX is notably overbought.
2. Rising market has Trump arrogant with regard to tariffs (e.g., recent threat toward EU, and statement that tariffs on Chinese goods will not be rolled back as part of a deal).
3. AAII bullish sentiment above 40 and advisory bullishness above 50.
4. Put/call ratio is notably low.
5. Vix is in the 12s.
Probabilities next few days/weeks:
1. SPX pauses at Sept high (just 1% to go), although strong earnings could push it through with force.
2. Stocks sell off 1-2% on commentary/confirmation from Trump (and/or U.S. team) that tariffs on China are “likely” to stick post-deal.
3. Stocks rally through old (September) highs when Trump (and/or team) walks back that China tariff threat. Or dip further if instead he reiterates it; then rally back (to new highs if deemed sincere) when he retracts it.
4. Stocks take a notable hit, testing support at September high, when Trump threatens to hit EU harder than the $11 billion just proposed (he seems hell-bent on tariffing [or at least threatening] German autos); assuming that comes after new highs are registered. Otherwise, this will simply exacerbate an already established short-term downtrend.
5. Intermittent spikes and selloffs on corporate earnings reports.
Probabilities further out:
1. The longer-term prevailing bias remains bullish. As long as the underlying trend (general conditions) remains positive, stocks will continue to melt higher.
a. Political risk favors ultimately smart decisions around trade.
b. Global hard data continues to improve, against concerning sentiment.
c. Sentiment improves on positive trade news.
d. Fed remains committed to being uber-careful going forward, at least while trade risks remain.
e. IMF strenuously urging global central banks to remain accommodative.
f. Earnings (and outlooks) hold up in the face of global trade worries.