I thought the market acted strong on Friday but the president fired up the tweet storm and China retaliated. That isn't really that surprising. None of us know for sure what sort of deal was offered / rejected and by whom behind closed doors. Trump tweets "China backed out of the deal". That may in fact be true but I don't know why anyone would believe the president after 2 years of lying. And really, it doesn't matter at this point who's fault it is anyway.
Supporters of the strident approach the president has been taking claim that it is a negotiation tactic. Reading between the tea leaves of Chinese "news reports" (that would be their government talking), the Hawks are emboldened in China. It's looking more and more like a trade war and less and less like negotiations. Trade wars are bearish. Always have been.
world wide trade wars are what are bearish and that is what happened in 2030. this is different. this is just one country. at some point in the future, 2030? 2040? 2050? the planet earth will have TWO trading blocks and TWO internets. One around the USA and one around China. With ZERO trade between the two countries it will not be horrible. it will be great. China is a butt head. We still trade with Canada, Mexico, South America and Europe, Japan, Philippines, etc. lots of world wide trade. Not bearish. Stocks are going down cause M2 has suddenly declined sharply. if the FED wanted growth we would have growth. This is the FED not china. FED evil, trade war with China Good.
Reports are that China will first target farmers of beef and peanuts (I eat fish and almonds).
China dumping US Treasuries is also under consideration. My guess is that would be down the road not anytime soon.
China dumping Treasuries would be the BEST thing that ever happened to the workers of the USA. I sure hope they do it. The USA FED with there evil plans of supporting the bond market will finally be undone. Low long term rates hurt American growth rates.
You were talking about the underlying strength in equities, which still exists, but to make short term price action predictions, you'll need to predict Trump. Not sure that can be done.
For the last week in general and yesterday in particular, Wall Street has been pricing in the absolute worst case scenario for the outcome of the trade war. The absolute worst case scenario is certainly a possibility, but not very likely. Equities will be showing adjustments (upwards) to that effect, barring another "Trump" factor.
IMO, stocks are currently strongly over sold and if/when this trade war gets resolved, the market will be rewarding patience.