Market Briefing For Wednesday, August 19

 Executive summary:

• Record S&P closing high, despite negative breadth and ho-hum enthusiasm, outside of a handful of super-caps, which almost seemed structured to attain this all-time high goal.

• The S&P is merely catching-up with the 'ascending wedge' patterns achieving new highs previously for the NDX.

• The Dollar continues weak (UDN) and not quite ready to turn, but technicians tend to suspect a Greenback rally could be associated with an S&P decline (perhaps).

• However we are a minority that believes a too-soft Dollar is a negative and also do not want to see continued movement toward negative monetary policy.

Liquidity pushing assets higher has been and remains the bullish case for stocks of course. In the course of preparing for the turnaround back in March, when I shifted from bearish-to-bullish on-a-dime during the 'max-fear' panic capitulation, I recalled a mood I referred to at other crucial 'systemic risk times' of the past.

That of course was 'don't fight the Fed'. A huge liquidity-driven move is psychology to a degree more than fundamentals; because otherwise there's little justification for some of the beyond-rational price levels; that might occur in a normal bull market. It's also what you can get if 'The Inger Bottom' was more than just a 'pothole' setback. 

That's how you get markets like this historical run, with long-time bears throughout our projected 2020 rally as we reversed March 23rd .. now flipping. As those bearish all the way up folks increasingly capitulate (mostly this week), they now concede the S&P could do a pattern like the NDX already did, so be concerned not encouraged.  

Of course the 'need' is for a fiscal package to get passed; under duress they will also move given the alternatives (how about politicians telling constituents they opposed it this close to elections); hence we have to allow for stocks that benefit from funding at the consumer level in sectors where it does work (Target (TGT), Home Depot (HD) etc.; though it does not mean this is a good time to jump-in; a dilemma for that crowd that missed the entire move).  

It's the 'value picks' they point too; but value picks require rotation beyond the minor bounces we've seen, if you're going to see sufficient participation to give the Indexes a better tone. You don't really have that; Banks remain in the doldrums (no surprise); Oils are firmer but not really robust (about as suspected); and technology is fine but very expensive. And even if you do broaden this out that isn't automatically bullish to the degree some suggest, because if it required funds shifted from the 'super-caps', of course leading the move, then the others couldn't quite offset that profit-taking. It all gets interesting, because once Apple (AAPL) splits; it's role in the Dow changes (Home Depot and United Healthcare (UNH) of all stocks, takes the helm) but not in the S&P 500. (Of course the Dow is price-weighted; while the S&P is capitalization-weighted.)

Bottom-line: markets are forward-looking, but the leadership is looking beyond what has been a moonshot (including our own AMD pick-of-the-year last year); hence it's a market getting to a level where you get signs of exhaustion; even though occurring in a churning way; right as S&P records new highs.  

Look at today's new highs: the Generals leading the soldiers, normally that's tends to signal an unhealthy 'formation of the troops', as the leaders could be at the 'point' as military parlance would have it, and thus be the ones vulnerably to.. being shot.  

It nevertheless has been a 'suction effect' market where money came out of Banks or mediocre sectors; but also hints at some permanent changes in societal functions. At the same time I'm not buying the idea of many 'not' coming back, which simply a look at 'gasoline' demand the other day hinted; people want to get back to semi-normal.