Market Briefing For Friday, Oct. 20

Looking way over their shoulders on this Anniversary of the 1987 crash, investors quickly saw that this wasn't going to be a replication of that day; a drop that was telegraphed in advance by currency fluctuations we noted all the way back then (in predicting that break and ensuing buying opportunity), and the less-noticed attack by Iran on US-flagged tankers in international waters of the Persian Gulf, resulting in a US Navy response to which Iran in fact did not take further action.

But really the shakeout this morning (amazing how quickly people freaked), just hours after pronouncing a permanent bullish state; or Nirvana even, as they hailed the 'greatest bull market in history', was not going to stay down. We called for a turnaround and by midday concluded we might recover all the way, simply because of how this market works until it doesn't (and since we know the leveraged crowd out there is desperate to hold this together).

The shakeout also was 'not' occasioned by the issues noted; or even really by the stories surrounding Apple, though it led the downside. Even that was not news to anyone alert enough to a couple things: the mediocre sales for the iPhone 8 and 8 Plus because the differentiation from the '7' isn't great, or as Apple loyalists wait for the iPhone X which is the initial new design or next-generation iPhone.

For Americans it's mostly the latter; for Europe they're selling; because the X will be ridiculously expensive; and for the Chinese; no iPhone sells well at this point, because of the missing 'payment' and 'chat' Apps, as I've noted in the past. And that's the real issue; not merely cutting-back supplier orders by maybe 50%; something I already mentioned in comments yesterday.

The story now is that iPhone 8 orders will be drastically curtailed as soon as 'X' comes onto the market in a couple weeks. I believe that Apple over the next year will move to all iPhone supporting Qi wireless charging; and most will use OLED screens (better color and presumably no half-life issues such as plague buyers of some OLED 4k televisions). 

Bottom line: again this recovery wasn't a surprise. And neither were prior market's lackluster rise on IBM's spike, all of which capped several days of near divergences within other indexes and of course the A/D Line. Basically this was technically driven and not a response to extraneous influences.  

We have a good idea that the silliness of pundits saying 'you knew this was coming' in the morning, after hailing the greatness of it all yesterday; and by day's end saying how this just proves 'buying the dips' is the only approach; well they risk falling into a trap. We've seen this before, where you get some sort of break; it recovers; the optimism returns, and it was really a desperate 'hail Mary' rebound. In this case not quite because we didn't (and don't) yet have all the elements for a true catastrophe drop; but the problem with any effort to gauge the degree of risk, is that you don't know what happens as or if a decline that's a correction 'then' finds something new along the way.