The market was already mushy coming into the session, but it took a couple of hits from comments on China – US trade talks and an eventual agreement.  Larry Kudlow mentioned on Fox Business a deal is still a long way to go.  Then came reports suggesting presidents Trump and Xi will not be able to meet before the March deadline for hiking tariffs. Although the market is down on the news, I think it could be down a whole lot worse.   

There are two separate forces at work here.

Sellers

• Naturally anxious about all of this
• Taking profits thinking this leg of the rally is done
• Closing positions from trade talks and other issues

Holders

• Think it’s too crazy for administration not to extend deadline (Trump has spoken more positively about a potential deal even at SOTU)
• Want to be long for potential breakout
• Earnings and other data coming in better than expected

The Dow has some support around 25,000.  But the key number on downside would be 24,500.  For now, I think it would be wise not to panic, although taking profits on big wins wouldn’t be the worst thing.

It’s going to be interesting to see how this market finishes the session.  I continue to believe there will be no shutdown II, and the increase in tariffs will be delayed again until the two leaders can meet face to face; Trump and Xi will not bother to meet face to face without a serious framework for a deal already in place.