"Always be nice to bankers. Always be nice to pension fund managers. Always be nice to the media. In that order."
-- John "Teflon Don" Gotti
Even before he was elected, a large group of bears were convinced that Donald Trump would be the catalyst for the long-awaited market correction. The argument was that the uncertainty he would create would produce volatility and roil the market.
While that sounds like a decent argument, it never came to pass. Instead, the market has focused on the hopes for positive economic policy. Optimism has increased and the market has been in a steady uptrend since Nov. 7.
Recently, it has become clear that fiscal policy would not advance as quickly as many had hoped. The repeal and replacement of Obamacare did not go smoothly and the much-anticipated tax policy has been delayed as other matters have distracted from it.
This morning, the market is reacting to news that President Trump had said to FBI Director Comey "I hope you can let this go" when they discussed the investigation of General Flynn. This is the sort of thing the media has been desperate to find. There has been a competition in the media to find some wrongdoing. A number of theories have been advanced but the market has shrugged them off as just the same old tired political games and media bias.
Today we have a test of how much the market cares about the political gamesmanship. The market has automatically bought news like this ever since Trump was elected. The computer algorithms are set to buy any sort of dip. The bears are never able to gain any real momentum when they have something negative to work with. The negative news never sticks, and that is especially so when it is related to Donald Trump.
Is the Trump Teflon wearing thin? Will it be different this time? Will this headline finally matter? I doubt it. This sort of political bickering is an idea opportunity for the computer algorithms to go to work and buy. Before you know it, the market is recovering and people will wonder what Trump will have to do to hurt this market.
The answer is failure on the economic issue. That is what the market really cares about. The FBI director controversy will only matter if it is perceived as a distraction that prevents other policy from being advanced. The bears were hoping that was the case when Comey was fired, but it didn't happen.
Despite the all-time highs in the major indices, the market does have some technical problems. The narrowness of the strength, with the Big Five stocks such as Action Alerts PLUS charity portfolio names Apple (AAPL) and Facebook (FB) dominating, is covering up much less buoyant action under the surface. There has been choppy momentum in both directions and underperformance by small caps.
The bearish arguments are numerous and loud, but have yet to take hold. While it is unlikely that the latest Trump controversy will have a lasting market impact, it may do a little technical damage and help set the stage for the correction that is sure to occur sooner or later.
Buckle up your trading helmet. We might actually have a little increase in volatility today.
(This article originally appeared at 7:12 a.m. ET on Real Money, our premium site for active traders. Click here to get great columns like this from Rev Shark, Jim Cramer and other writers even earlier in the trading day.)
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