Market Forecast For Tuesday, September 6, 2016

Extend and pretend is the behavior the Fed has promulgated with their lack of action while proclaiming a fertile time to do so (actually the harvesting of low rates should have been completed long ago; hence they got into this pickle). 

What's needed is a Fed that bites the bullet and indeed internally examines itself (all the way toward reinvention if need be); a Congress that clearly makes commitments to direct funds to domestic improvement and small-business empowerment (one may be amazed how just a few changes in the tax code, combined with trade reform, may revitalize the nation more rapidly than extreme pessimists allow); and all of these for sure would be enablers of a renewed spirit on the part of entrepreneurs of all types. 

But on the way to the forum of prosperity, there has to be a washout; of Government that gets out of the way of business and wealth creation; and creates real opportunity, for those that might not have seed-money or backing from venture capitalists. Sure, a segment of well-funded firms got off the ground during this economic morass; imagine how many people would be prospering (or trying to get going) with real incentives and tax advantages to take business risks, not simply chase dividend income. 

By the way, financial candor needs to increase. For example; Americans were told of housing strength this past week. The existing home slump was blamed on inventory; which wasn't really the case. 

It's also the nature of 'most' money managers to shuffle the decks a bit; more to the domestic-centric areas, than it is to build cash. The credit markets are even more glaring in terms of risk, such as the High Yield sector in particular. 

Daily action  

The lateral market action, with a 'save' on Friday's shakeout, held above the 'save' on Thursday. That matters, because it went slightly below the prior Friday low, which risked the Sept. S&P moving into the enormous area of a vacuum.

That vacuum exists from about 2140 down to around 1980; and could see lots of algorithmic selling (and leverage unwinding attempts) if we breach this level as we've discussed. 

That's also 'why' they keep throwing just enough leverage into the market to try preventing that; as can be gleaned by virtue of no upside follow-through when a rebound takes place. 

Hence the market seems (and is) essentially lateral; but the efforts to recover as they fail within comebacks, is analytically indicative of a very tired market, that's sort of 'Waiting for Godot' in a sense; but it's not just a summer market (some are up and some are down). It's a market with lots of 'tension on the tape'. 

For now we continue short the Sept. S&P from Friday's new guideline at 2183. However, because it did provide a profit from 5-10 handles during the day as the first rally was again sold into; we presume traders took partial gains well in advance of the close. So essentially even though it's a new guideline; already it is a 'partial' guideline since it was so solidly ahead earlier in Friday trading.

The market may labor with yet another post-holiday attempt; that's often what you get in a 4-day trading week. However more of the same should gradually get to a point of some new correction effort as opposed to lateral moves. We'll try to assess what comes out of the G20 gathering (didn't start out too well with a rather brusque or rude reception to the White House staff and reporters; not to the President himself as some report, at least as far as is known). 

We'll also be watching the political aspect, because with Trump now holding an edge in polls, that is (as I've often said before) probably preferred by the private sector, but not by Wall Street or the big multinationals; definitely not by China or some trading partners. It's a pledge to shake-up the Establishment, not continue business as usual. Of course just like Brexit; nothing much changes quickly.