From A Macro Perspective

From a macro perspective - we're experiencing an S&P topping formation that may or may not turn 'south' rapidly, or persist in a distribution process. After all that's happened in the past year-and-a-half, it is again dangerously extended.

During this time we've had some marvelous moves outlined, primarily biased to the downside (solely on spikes and not after the crowd capitulates after breaks), and hugely profitable for those who played it appropriately. The point being that the 'real' policy mode of the Federal Reserve began to squelch stimulus quite a while back, initially with tapering, avoiding more QE, and then nervous firming of the 'Funds rate'; only to have trepidations about further moves, just as we hear over the past two weeks, yet again (even Thursday two Fed officials made just slightly less dovish, if not hawkish, comments; and the markets briefly shook).

It's dangerous when a market has nothing of substance sustaining it other than dependence on Fed monetary support; and it's dangerous when the Fed tailors its remarks to transparently seem almost timed to buttress financial asset levels, which actually is not its mandate.

What does all this mean as we forge hellbent into Q1 earnings season? It likely means the meanderings of the late phase of this rebound cycle face rising risks; whether or not we get an almost immediate exhaustion of the persistent stability that's followed the rebound, or whether the horsing-around persists a bit longer.

When one glances at the 'dome' we've shown at the end of these reports, or at tonight's more lateral resistance chart; what you see is a 'range' from here up to the prior year's highs, from which vulnerability increases. That's why I made the remark yesterday that if one established a short position (or similar) pressing up against the 2060 S&P level, for something of a bigger picture bet on forthcoming consolidation at minimum, that something like 2070-80 could suffice as a mental stop area; allowing this irresolute chop only a modicum of 'wiggle room'.

If they manage to surmount that level one backs off and presumes a further rise; although absent a consolidation, that becomes extremely dicey to envision. But, we're not alone in believing this market overdone on the upside, which means a sporadic amount of shorting (or hedging) occurs, and those get backed-off until a market decline of some substance again presents itself.

Bottom-line: the market has been gyrating in a high-level rebound range; with standard pitches about Fed influence and delusional recovery prospects heard for the most part. Buybacks are off-the-table as a support too; for companies in front of earnings; and the sensitivity to events has returned front-and-center as the new Quarter starts. The Oil gathering in Doha (if it even occurs) might have some meaning for higher or lower oil prices; though Oil stocks helped the rally, as they rebounded, without any certainty about improved earnings prospects.

For the moment we hold the 'inflection' (position) short from June S&P 2065; as well as increased light positions one may have obtained during morning rallies basically every day. I mentioned the 'macro' picture because although we went through the worst January since 1933 and then the best month since 1933; that basically says the market eased back from overbought to oversold, only to get overbought again; without a fulfilling resumption of correction.

That suggests, in a backdrop of risk and mediocre global growth, that the next primary move of significance, is likely to the downside, not upside; although the timing can be variable, and initial phases of decline tend to be fought by Bulls, as they know what's at-stake, but generally won't realistically share.