Market Briefing for October 27, 2016

Prospects of a plunge persist, which to a degree may precisely explain why resilience prevails. It's not just that shorts get run-in as we often point-out, or that selling appears on the rallies.

It's partially a result of money managers trying to re-position in different securities than they previously held (or adjust the proportions). That's how you get a seller of Apple or Edwards Lifesciences, perhaps moving into a Boeing regardless of the profitability prospects not really that much better (but rationalized about smaller narrow-body aircraft such as the 737-'max' effectively matching the earlier sales thrust of the Airbus 'Neo' for instance).

This musical chairs effort may additionally relate to an approaching end of most fund fiscal years; with the requisite postponement by investors 'till they get past ex-dividend dates and so on. This occurs every year, but the 'shuffling' may be a part of trying to 'hold the line' until month-end.

Yes, there is a line; a couple of them actually. One is the lower-end of the range we've observed in recent days, which came-out today after a desperate (and projected) intraday rebound. The other is not far below around the 2120 level in December S&P futures. And perhaps the last bastion to give way might be right around 2100 itself.

Technically, because once it becomes so evident which way the S&P pattern is leaning (to us it already is but it's being fought as a drawn-out trench-warfare rather than an 'event') there is a risk that the lower S&P level doesn't hold, with the market just slicing thru it, given the visibility.

If that's the case, it would become the 'keyhole exit' moment, and that's why I'm focusing on this, more so than macro issues. This is normally our daily commentary topic, though daily action becomes a bit more crucial here, to say the least.

In Summary, we will note some of the economic or other developments via video or charts with a focus continuing on the failure of post-Expiration rallies to revive enthusiasm, and with the market increasingly 'heavy'. It has afforded opportunities for selling or lightening-up on unsustainable intraday and intraweek rallies, but that's all they are for now.

Whether the market breaks now or defers it yet-again, it is the height of folly for analysts or pundits to encourage buying here. I would go so far as to say it will in retrospect place today's cheerleader types in a demonstrably negligent posture for failing to be defensive. A defensive stance (or just sitting in cash or equivalents) is preferable to the exposure that those encouraging 'riding it through' would place the Nation's investors in.

We don't encourage liquidating core holdings that were purchased at dramatically lower prices. We do believe having cash to take advantage of any big purge is important to investors, while traders speculate on the ramifications of a long-lasting range that appears closer to a time of reckoning.

Bottom-line: this is not a complacent market. It's a sweat-it-out period likely culminating with a downside market move, perhaps even before the fund fiscal year-end runs its course, or we get past the Elections.

We persist with our overall very successful most recent overall short sale guideline from the December S&P 2167 level.