While stocks have made a nice comeback from a crucial technical test of the 200-day moving average, there are some clouds forming on the horizon that I see as potential obstacles to clear for the market to rally above the prior highs.
A lot of attention is being given to the U.S.-China trade talks, the reworking of the North American Free Trade Agreement (NAFTA), the summit with North Korea, the tariffs on European imports and the U.S. pullout from the Iranian nuclear deal. As far as geopolitics go, this situation certainly deserves investor consideration to assess whether any news is good enough to lift the market or bad enough to provoke real downside risk.
At the present, the market is content giving the benefit of the doubt to the notion that cooler heads and rational dialogue and negotiation will prevail. We can see this in the persistently benign level of the volatility indicators. The level of worry by investors is not elevated, at least not now.
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