Black Friday

'Black Friday' - might come early for Wall Street by about two weeks; despite some pundits extolling 'extant' sectors they view as 'reasonable values' in this market; in-itself an admission of things falling apart on a rotational basis; much in the manner we've outlined for some time.. a process until they figure it out. 

I might add many such stocks (including extended Defense sector issues that are high and thus being 'promoted' on the basis of military preparedness), are merely in the line to be trimmed-down to better values; those so-called buys in most cases are actually sales (or avoids). Not to mention such calls to 'buy' do not mention 'how', as most investors with fully-laden portfolios are seriously at risk with respect to paper losses in their existing holdings. 

I mention this for a couple reasons: 1) it's too soon in general to be a buyer in a market just starting to feel its oats on the downside, and just tripping levels I outlined that would kick-start algorithmic selling not buying; 2) major selling or redemption's, if it's going to really be a world that finally understands how Fed and other policies have worked against the well-being of the Nation, are barely out of the starting gate when it comes to a full downside pattern unfolding; 3) I pointed out for weeks how distribution was going on as a 'narrowing universe' of stocks was holding the Indexes up, while 'rotational selling', no long what of course earlier in the year was 'rotational buying', was becoming dominant; that was part of what we called the 'lack of mojo in the momo' stocks (momentum failures and no gusto to any move higher anywhere in recent weeks really); 4) because the market extended the move in October; that made November less safe, and increased the downside prospects for not replicating what preceded; and finally 5) that major hedge fund sales are just starting to be picked-up on, and that suggests increasing nervousness, redemption run risk, and aside the requisite periodic rebounds, a market that works to lower levels. 

In a nutshell; that 'could' set the stage for a 'plug pulling' superficially billed as 'bargain day' Black Friday sale prices in the morning; Friday the 13th no less! However don't trust any turnaround effort, and realize that even if activity may be narrow (what often happens after a significant down day) it's part of a larger process that by no means is at a conclusion; even if we had an intervention by China or the ECB, 'trying' to pump more helium into a sagging pricked balloon.

The other prospect is a real Black Friday; as a nervous weekend approaches; a realization that war clouds are not only gathering but thundering more (most don't even know that the IAF attacked an armamentarium by a military airport near Damascus early today; nor whether it was done by Israel at the behest of the U.S.); the Nation's largest hedge fund dumped a third of entire holdings in the weeks just past (that's how you do it; selling while into strength while they are all promoting higher prices, as part of the 'Greater Fool Theory' we talked about in recent weeks); nor the realization that 'almost everything' addressed here for the past few weeks is being cited in the media 'now' as reasons for the stock market to drop, or even a 'recession' to be considered possible. Ahah. 

Well, with all respect; I pointed-out that once the S&P 'really' broke, you'd find media citing all the same 'facts' we've outlined; that were there while Indexes, at the time, were still advancing, but were ignored despite their importance, so long as the trend could be 'seen' as up (saying that because breadth steadily has deteriorated for some time; predating the peaking of the last rebound). OK they have to address 'why' and I wonder if they'd even notice 'shipping rates' or railcar loadings etc. if the Averages weren't on the defensive. I'm not cynical just have seen this before; and just like the hedge managers who 'scaled out', not in, during the recent rallies, quite strongly felt this was coming, based not on just a sense of gloom, but the facts relating to business and growth rates.

In-sum: Chair Yellen today said essentially that: policymakers should also be"mindful of new channels for monetary policy transmission that may have emerged from the intricate economic and financial linkages in our global economy that were revealed by the crisis". (Fedspeak.) 

Vice Chair Fischer as well spoke, saying: "while the dollar's appreciation and foreign weakness have been a sizable shock, the U.S. economy appears to be weathering them reasonably well," Fischer said in prepared remarks at a Fed conference in Washington Thursday. "Monetary policy has played a key role in achieving these outcomes through deferring liftoff relative to what was expected a little over a year ago."  He leans toward a hike next month.

New York Fed President Bill Dudley: basically said we might increase rates at a slow pace so as not to be too disruptive.

My take on these (and the other Fed-heads speaking): perhaps the traders of course know the bias toward hiking rates; the pundits can't handhold beyond a point where the Averages having rolled-over becomes evident to everyone (as usual well after the 'keyhole exit' and barn doors are closed); and so they may as well 'let it go', ending the masquerade since you know they do NOT desire a Fed rate hike, so the best chance they have now to deflect one might just be what nobody's considered: tank the stock market. 

That just might put the fear of God in the Federal Reserve Board, giving them a chance to get the Fed to 'pass' on a move (ideally not, but they can hope). If the market is seriously down in the next 2-3 weeks, and 'retail' is as bad as it appears to be (oddly the tactic on Wall St. would be to emphasize bad news as bad news so as to facilitate a deflection by the Fed), they can hope both for that possibility, and perhaps enough of a washout to set-up a year-end rally. 

Bottom-line: none of that is impossible; and we'll assess it along the way. But recall that I've said you might get a year-end rally (hate the stupid term Santa Claus rally, because fully long leveraged investors might be able to afford just a graying lump of coal by the time that rolls around, though the timing of all of this can roughly concur); and I said any such year-end rally might arrive from considerably lower levels. We're on our way. 

All rallies should be false & abortive, as has been the case most of last week, and all of this week, which is precisely why I've stubbornly retain our overall short-sale that began a week ago Tuesday on the ridiculous spike extension allowing our guideline short-sale from December S&P / E-mini 2109.  

I will discuss all this more below and via video; while simply noting that there was logic to my sticking to my guns; virtually all internal behavior remained bearish throughout this time-frame; with all rallies being unsustainable routs of shorts, and nothing more. That became increasingly obvious in recent days.