Market Briefing For Thursday, July 15

A major volatility event - on the horizon, is what worries most everyone. For sure there is risk for what I termed yesterday as an 'out of the blue' whoosh, or dramatic air-pocket in the market. For stocks already depressed or corrected a lot, any such event would likely be nothing but a buying opportunity.

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For the big-tech-mega-caps that are so overpriced, even with underlying good business models, the first dip buyers will likely get killed as lower lows would be expected thereafter. It is not correct to say 'all assets are high', but also for sure there has been a crowding-into the usual handful of stocks, based on the TINA interpretation of conditions (there is no alternative). It's a high-wire act.

That's also why the S&P responded so well to Chairman Powell's remarks just today, with a rally as soon as it was clear the Fed won't embrace tightening in a rapid way. The Fed is trying to delay the inevitable 'snugging-up', with even former Treasury Secretary Mnuchin and Larry Fink also criticizing this policy. I think their earlier interviews on TV speaking to falling 'behind the curve' likely hit home with the Chairman, as his response to questions seemed (to me) at least somewhat more amenable to looking at 'tapering' sooner than later.

And especially if we were to see PPI or CPI persist in jumps such as recently.

The risk of propagating an asset bubble of course threatens a bigger accident than otherwise might occur, but there again the internal corrections already in large part under-the-belt, mitigate against it impacting many stocks.

That sanguine attitude won't prevent Indexes from breaking, because most, at this point, remain dominated (especially market-cap-weighted Indexes) in this era's momentum darlings. So ideally we get a break, not as severe as what I looked for in January-February of 2020 (pandemic crash warning), but more so than what we've seen earlier in 2021. But the Fed keeps it at bay -for now- even as doing so in a way (especially with inflation we have) aggravates risk.

Overall... the rolling correction / rolling bear / and absurd extensions, prevail essentially concurrently. Meanwhile the focus remains on Fed tapering timing, with the Chairman (under questioning) acknowledging 'they' are looking now, and getting comfortable with the notion that they really have to reduce some of the 'mortgage-backed securities' buying and so on. They are fueling more of the inflation they want, but they want minimal degrees (good luck threading the needle on this), which is why they have to not get far behind the curve.