Market Briefing For Thursday, Sept. 9

Anxieties swirl - while analysts keep jockeying forecasts; but typically these debate the extent of risk, rather than whether there 'is' risk. Of course there is; and more so for the handful of 'mega-caps' that have held up S&P and NDX.

An example of jockeying is Bank of America today; raising downside targets for the S&P to 4200, from their prior goal of 3800. This is probably not as dour as some reporting it think, but rather reflects reduced depth of probable decline because so much of the market didn't perform well on the way up. That's been our point for ages, as to why S&P etc. can 'shake' but not necessarily result in a disastrous plunge for the broader market.

For the most part all this reflects Covid-19; especially since the 'delta variant' arrived. In the Fed's 'Beige (Tan) Book' report; Covid was mentioned about 30 times; seemingly 'as cover' for the Fed postulating longer expansive policies. I think it's naive to believe the Fed would actually tighten without market impact of significance; hence the high-wire act the Fed performs by continuing easy.

In a sense the longer they stay 'uber dovish', the longer the perceived trend is likely to be intact; again save shakeouts or even a reasonable correction (we have that in the majority of stocks; but barely or not at all in most mega-caps). And I say perceived as the playing field has indeed shifted; the influence of a new generation (emboldened by the no-fee commission structure empowering creation of a Robinhood and others, and facilitated by order-flow payment) is very important. Some cast aspersions on historical patterns, monetary policy or even liquidity flows; and it will take a significant shakeout to see if they're a bit disciplined, at sufficiently to know a plunge makes you look to buy not sell. 'If' we get a meaningful decline in the next few weeks that will be interesting.

Technically; there's really no change from recent observations. What you have is a long-term wedge in the S&P, which 'sort of' had a lackluster breakout over the rising tops of that pattern; and now sets-back a bit to the higher end (line) of the overall upward channel. It's a variation of 'resistance becomes support', of course; but interesting to observe given that a handful of mega-stocks are dominating the action.

It isn't all that significant; because S&P rotation can compensate for awhile; until something comes along (it could be ECB going away from 'free money') that's agitating enough to money managers to compel an exit strategy. If the money managers plan (probably the intention) to capture and control declines to within a few percentage points, the key might be if the mass of investors in a broader cross-section of stocks steps back and is merely averse to buying, or conversely recognizes a pummeling as an opportunity. Of course this year we have 'the battle to defeat the beast'; which leave resolutions in suspense.

What managers have for now is a stabilization strategy; resisting daily to deny seasonal as well as justifiable corrective action in those mega-cap segments. Competing is not a term for this; because it's more likely peer-matching within the hedge crowd; plus it's algorithm-driven which can become problematic.

In sum: very defensive even on revival; rotations are ongoing; there are more opportunities for landmines than goldmines this month; and there really isn't a more bullish near-term prospect for the Senior Indexes, for now.

The majority of bulls try to rationalize this situation by statistical demographics looking at the youth levels of most market participants. Their involvement is a welcome embrace of capitalism; but also a spin on 'buy and hold' forever if an analyst thinks today's market traders aren't savvy enough to see problems in the Country, in a company, or personal needs to move money around.

There are times when the expected returns are minimal; this is one of those at least over the next few weeks. Especially because a meaningful pullback may give those with some liquidity the opportunity to enter at the lowest cost they'll possibly have for the next year or so; with a proviso. That's dependent on our getting an effective treatment (not just vaccine) for Covid and variants. That's the ticket for confidence across age demographics to out and and live life.

And that's so important for our kids and teachers; who have been exposed to 'the beast' (Covid) rather significantly; which is something I dreaded even as it is popular to suggest 'peak Covid / delta' occur this month. Indeed it may peak but the active disease and hospitalizations will lag the infection pace. Plus we have the 'Mu' variant, which I feared would proliferate a bit; and so far it has.

I continue to encourage development of monoclonal antibodies; whether it's a Sorrento, or Lilly or other pharma; or pills such as Merck is working on; or at least better vaccines that especially target the 'delta' variant. By the way that is being studied right now; Pfizer got their first batch of 'updated' vaccine lots in August.

I just want to see a broad 'armamentarium' of approaches available to doctors without political bias or undue financial influence from pharma's (good luck on that). Just today I learned Metoprolol, a common inexpensive beta blocker, is useful not just for blood pressure, but to relieve lung issues in ARDS patients in ICU's or struggling to breathe. Turns out I got that one among others; but note it as there was a writeup about it just today and many may assume cortisones alone (I had that too) treat ARDS. So too 'stem cells' from Sorrento; we'll see.

Thursday brings President Biden's '6-prong strategy' to combat Covid; which is now heavily impacting schoolkids. Hundreds of thousands of kids are already infected; and we hear too little about long-term effects 'even if' the kids are mostly lucky enough to avoid 'initial' serious illness. I won't explore this now (most of you know about the long-term cognitive and IQ concerns) at the same time there's no real solution for the younger kids thus far.

China, as we've said before, is fighting for the dominance of their Communist Party over their population. Hence the urging of reduced game-time for youth; defamation of 'inappropriate behavior'; and encouragement of masculinity. So is that sort of like Germany's Third Reich in the 1930's? I'll leave that to you to ponder; but it sure can be the backdrop for a country expecting a .. war.

So, honestly, video games and kids cos-play or makeup, would be preferable to indoctrinating some sort of Kung-Fu macho militaristic mentality to support a Chinese Communist Party's aspirations for suppressing people's freedom.

For Thursday we anticipate a fairly meek effort to rebound further but faltering is a distinct possibility later in the session; especially for mega-cap leaders.