A buying panic ended long ago, with a somewhat agonizing period of jostling within a comparatively narrow range prevailing for awhile. At the same time fundamentals have backed our contention of economic slowing sufficient to perhaps be tracked as the start of renewed bouts of recession, from roughly mid-July forward of this year.
Concurrently you have the 'stuck' mode of Fed monetary policy; failure of most stocks to respond impressively on favorable earnings reports, complacency towards the deteriorating credit market conditions and a fairly benign response to international developments.
All the while the financial press focuses on politics they can't resolve, a debate that probably won't shift polls that much and a frustration that's almost boiling-over with respect to both candidates. It's embarrassing to both parties and both have policy burdens to bear.
Technically, nothing really changed as the market again pressed up towards 'standard deviation' means and essentially lets it respond either way both to the debate and perhaps more importantly the nominal October expiration.
One of the factors going forward that should be kept in mind is 'fiscal' year-end, which is October's end for most mutual funds. That might tend to contribute to 'holding the line' (and there is a line) until then, but at the same time if this market can 'bust' before then, it could actually be a factor aggravating selling (if not redemptions).
Fundamentally, housing fell sharply (primarily multi-unit housing like apartments) while single family starts actually rose. What this might be reflecting is high rents, and younger families buying homes while they can get (those who can) favorable mortgage rates. However, we don't see housing as a sector sufficient to replace the lost leadership seen in most sectors (and permits were flat by the way).
The Beige (or Tan) Book suggested modest activity. This is no surprise to us, but doesn't conform to the typical bullish outlook they projected in the last two quarters of this year. The point is simply that nothing is going on or improving to justify the market's high levels, aside strength in Oil, which actually has been mostly aided by Dollar strength, plus the comment from Saudi Arabia that 'many nations' are cooperating with an effort to negotiate lower output levels at the next OPEC meeting.
I hate cartels and two-faced nature of Saudi politics, which are entirely a self-serving manipulation, or in this case I suspect a compelled return to more realistic levels, under pressure from Russia, whose presence and influence on the region (especially Iran because of the alliance in essence to support Assad's Syria) can't be overlooked. That's likely the quid-pro-quo we talked about over a week ago.
Conclusion: No huge earnings turn is occurring, the market is led by Oil primarily, and a handful of large techs or similar, which dominate an otherwise moribund market. For now we hold short Dec. S&P from 2167.
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