Market Briefing For Friday, May 13

Proximity to rate hikes reflected upon by a couple of Fed Presidents, didn't halt the midday selling reprieve, which suggests (no surprise) traders are trying very hard to deter an approach to the 'edge of a precipice', which is fairly obvious just by noting levels from which every recent bounce of significance has occurred.

Technically the market bounced right from where it needed too (take a look at the S&P daily-basis chart or the video). Additionally we indeed got the expected late fade, and a set-up for more downward action on Friday.

This evening we'll let the charts and video tell the story; plus a few comments in the second video about Apple (AAPL), which continues softening as projected; and that is besides our expectation they will have a marvelous iPhone redesign, but not until later in 2017 (their 10th Anniversary model incidentally).

After the close Thursday, Nordstrom (JWN) reported and 'missed'; which should not be a surprise to any who recognize the pressures the retail market has witnessed, and is not merely everyone traipsing off to Amazon (AMZN) instead of brick and mortar. Of course that's part of it; but generally people are spending more on technology and a bit on entertainment, and less on clothing, or least high-priced clothing.

It's been quite a while since I mentioned the growing threat from style-conscious lower-end merchants, when first discovering stores like H&M and Forever21 and Zara in Europe (before they hit many malls around America) -  the terribly cheap (often poor quality materials, moreso for the first two than for Zara) imitation or sometimes original designs, which were affordable for kids, who do set trends.

I noted for decades how outsourcing was destroying high-end manufacturing by Americans and even Europeans, but it was these stylish-yet-cheaper retailers of course that creamed mainstream retailers, because kids don't care much about the goods' quality, if it's stylish. They'll just toss it and buy new next season and for that matter they don't want anything that really has fashion longevity.

For that matter look at what happened to GAP or A&F; tweens & teens got bored sticking with the same look. This is generally not the Brooks Brothers era, except maybe the residual holdouts like the Ivy League. Plus the acceptable quality of product from Asia has improved; so for many not accustomed to the better materials, it's increasingly hard to discern between the various merchants' products.

One example: last Summer, though I never shop such stores of course, I was in Galleries Lafayette in Paris, and saw a pair of soft boots I liked, at Prada. They were marked as 610 Euros. The sales kid tried to interest me, and they were of course very comfortable. I then noticed they were Made in Vietnam. I told him I don't spend 600 Euros on shoes; and if I did on a Prada pair, it would say 'Made in Italy'. He said 'well at least we're honest in putting the label on it'. To which I said, true; but now I know it cost 'maybe' 20 Euro to make these; and even with a 300% retail mark-up plus designer name value, it makes no sense. It was very rainy that day, so later we happened to wander into a nearby store by Zara. Saw almost identical boots (perhaps in appearance not quality) for 40 Euro. Got those and served the purpose. Perhaps that's what's happening to retail nowadays. 

Bottom line: the market is working its way to lower levels. It's got no amazing tale to bolster monetary policy or oil markets or much else to prevent breaking of these high level S&P support levels, as the most-watched Index gradually works towards 'catching-down' with where the NYSE and Nasdaq (or even DJIA) are already trading at. We expected some sort of intraweek failing rebounds; got it; got a couple dead-cat bounces (no offense at bouncing dead-cats please); and I think this market is well-positioned to break last Friday's lows almost any time.