A great 'moderation' occurred - very much in-line with the intraweek forecast for a pattern that started to exhaust and even reverse, after an upward start on Thursday. Nothing dramatic, and sort of a see-saw move within a range; while nothing contradicts the idea of an oil-and-Dollar sensitive market somewhat in the wake of the sharp (and contrived from a last-ditch support) short-covering rebound; led by the most-shorted and the usual suspects for a rebound.
Technically, the S&P's inability to surmount overhead resistance (not the first of the snapback peaks which is where we did encounter expected resistance); is a sign that this isn't simply a 'pause to refresh', because they might well try one more time (at least) to push this higher. The point is we're not among those that desperately are concerned about this, because they are overloaded on the long side, and 'must' determine whether they want to follow their own words as they generally got bearish a week or so ago; praying for a rally 'to sell on'. Well here you are; and there's no meaningful buy-side interest; with the longs holding-off somewhat, 'as if' they're waiting for someone to come and push this higher.
So while they might do that briefing; you don't have Fed monetary policy or the all-important (especially in-absence of a stimulative Fed) fundamental earnings picture capable of justifying chasing this. Hence it has to be viewed as merely a snap-back, alleviating the oversold condition of over a week ago, before market conditions soften. That's the case whether we get another push up or not, or for that matter a perfect pattern for be to 'pop' the high of February 1 just briefly, so as to freak some bears, and then see the market roll-over in a downside 'flop'.
Some technicians are busily debating how far the market move higher or lower. What matters is the message of the market; with highs or lows to be assessed later (in terms of measures). I don't disagree that ultimately we have downside prospects well in-excess of another hundred S&P handles; whether we first had a further bounce or not. Basically the market looks exhausted; Oil is not really a big help, though (absent 'any' real story about production freezes or cuts; in fact just the opposite as you know) we want to see Oil higher; and if that's because of (as dangerous as that would be) a Russian response to a Syrian incursion in Syria to attack the Kurds (also U.S. supported), you could see Oil up and stock down, concurrently.
In-sum: a stabilization in Oil is essential; a pause in European bond worries or (miraculously?) Chinese debt concerns, is fine. But none are sufficient to really generate a sustainable advance for the S&P; though the backdrop is seemingly less negative 'for the moment'.
This market (at the moment) has reached a measured move to the vicinity of a preceding snap-back; while the leadership is of a nature that doesn't support an idea of macro conditions resolved; or even being adequately addressed. Really it seems more like a market that 'got over' the shock of figuring out it's been in a bear market for many months; while getting a reprieve (the double-bottom of dubious origin, but able to run shorts) that takes the 'edge' off an oversold right at the critical support level; and now allows a completion of the rebound.
Overall: the debt, credit, default, and other issues continue to prevail. There is no significant oil rally, nor is there a viable deal to limit production (actually not in Saudi Arabia's interest to have prices higher yet, as they've not destroyed all the Russian, Iranian and U.S. oil industry adequately to achieve their goals.. as we incidentally hope they fail to achieve... which means the U.S. and Russia in the longer run benefit from a realistic price recovery, while the memory of this further 'war' by the Saudi's on other major global producers, won't be forgotten for years to come). I warned last Summer that Saudi had declared war on all of the other major producers; and having lived through two of these attacks with a flooding of the oil markets (including in 1973 warning OPEC would use the oil weapon to their advantage) felt it amazing so many oil producers dismissed the move by Saudi, at least initially, 'as if' they weren't leveraged or exposed.
Apple Bytes
Also smug, was the reaction yesterday by shareholders of Apple (AAPL). While many of course side with privacy; most will chose security when it becomes personal. It's natural to have a distrust of Washington (we're from the Government, and are here to help you .. comes to mind), as that mindset is based in our heritage (not to the degree of polarization we've seen lately however). I said yesterday that it is not conceivable to not allow the FBI into the terrorist iPhone, or any for which the authorities have a valid Federal Court order. Can you stop the FBI seizure of a file cabinet or evidence secure in a safe or safety deposit box? No. Same principle. Plus freedoms are compromised during time of war; and those saying the laws are going beyond that have a point; however, we are in a war. And yes the President needs to ask Congress to 'declare' it to make this a certainty; and it needs to be against 'Islamic extremist terrorism' broadly defined.
Now, without debating whether it gets to the point of proposed Legislation that will prevent refusal to comply with a Court Order, this has gotten carried away; and I think it needed too. (I suspect they don't really need new laws, as Apple would lose on appeal anyway, especially as the iPhone 5c used by the terrorist is actually owned by San Bernardino County, who already gave authorization to the FBI to access 'their' iPhone used by 'their' employee, who entered his own pass-code). Now I'm not a lawyer, but I did have some thoughts yesterday.
I mentioned that this would backfire on Apple, perhaps from two directions. One is obvious need to either take it 'in-house' (within Cupertino's Tower of London, as I put it, so they keep the keys to the crown jewels); a deal that should have been made by now. Also they should agree to do it 'for' the FBI in-event similar instances (with warrants and Court Orders) occur in the future. Secondarily the Apple policy could be changed so as 'not' to allow encrypted vanishing apps of the type as Snapchat to be available; or restrict those (Facebook's included) as allow totally non-recoverable data to recovery under sanctioned circumstances.
I understand two things: one we don't want anyone prying (including business snooping; many of us resent the mobile add marketing that occurs merely by a site we visit.. to wit, if I check hotel prices in Barcelona for a few days ahead of next Summer's cruise, and already booked accommodations, why must I see dozens of Barcelona hotel adds on various news pages I visit for weeks later).
The second is Apple's deal with IBM (IBM). Over the next couple years, many 'apps' will be introduced using special secure 'SDK' (software development kits) very specifically for IBM Services. A 'hackable' backdoor would compromise these plans; probably find its way to Chinese or Russian hackers, and therefore sort of defeat the very reason 'only' iPhones (not Androids) are allowed to be used in secure areas of Homeland Security now (sort of contradictory, but not really).
That's why I said yesterday that Apple's stance gains serious publicity 'initially', while a subsequent reversal (voluntary or compelled) would perhaps hurt their international sales (especially in snoopy China), like the Cisco incident did too.
So it's jumping the gun to presume penalties or Feds arresting Tim Cook or that sort of thing (concealing information on a device is not the same as a reporter not revealing sources in a murder or kidnapping case, but comes close) and of course sets a bad precedent if there is no way of entering a phone especially if a link is made by various intelligence authorities in future situations. Incidentally the 'fear' that an iPhone might have it's camera or microphone activated without one knowing? That's already the case; both for security monitoring apps and it should be noted, simply saying 'hey Siri' and the phone responds (clearly must be listening). Or how many realize that GM's OnStar or similar systems already have the capability of listening any time the system operator wishes (normally it isn't encountered other than in an accident or if you press for assistance, but it can be accessed and nobody seems bothered by that if used in emergencies).
Conclusion: enough about this; but because of Apple's capitalization this is a reason to see not only today's sell-off, but to expect more, and an impact on the S&P. Moving toward the lower portion of the 80-100 zone goal for the sale (and or short) from 128-132 (interrupted by the Fall rebound and then the 120 call to see it drop anew); I envision more vulnerability and suggest Apple resolve this, while they can, in a compromise way that won't harm what this is really about; which is business applications, not merely obvious personal privacy issues.
Today I hear pundits suggesting investors should buy stocks on this very slight pullback, 'as if' the market is preparing for new forward surges. While I'm sure a further attempt to rally is in their playbook; these are often the same pundits a week ago proclaiming a rally developing that investors who missed the drop will sell on. That's exactly how you get this oscillating (ranging like today) condition; and while irresolute for the moment, we're leaning toward failing rallies; even if they are temporary pops to higher rebound highs (and that's not assured).
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