Rampaging bulls were corralled

Rampaging bulls were corralled - initially by expected limited follow-through to start-off Wednesday's session; all inline with a phony upside December start. So in-line with our suspicion that Tuesday's upside romp was likely a one-day-wonder short-squeeze; we moved to the short-side, notably with just a half hour of lateral behavior (2100-2102) easing implementing any sales or short-sales at the guideline suggested: E-mini / December S&P 2100 or even a hair higher. 

At no time Wednesday or Thursday did mental stop points get challenged, and so we nailed what became a huge (not record as you recall shakeouts caught earlier in 2015, and in August too; although this was among the fastest). For all normal investors this sure matters too; as we strenuously urged 'not' investing or buying the narrative so prevalent on the Street to simply be more 'selective'. Remember, in a serious stock market 'hit', they take the good and the bad; plus (the piano player?), and there's a growing absence of bids especially when you get not only the Fed moving as suspected; but also continuing deterioration that 'consumer spending' throttling evidences. (That's why I showed how VISA had lower consumer credit card charges all the way through 'Black Friday'.) 

Now you hear the pundits suggesting this retrenchment is 'terror fear related'; and what we've proven is that, while events exacerbate this, the downturn was well-entrenched before the recent spate of 'radical Islamic extremist' attacks. It was even defensive before Chair Yellen; a combination that allowed this gain on the downside. So even as mourning the losses in San Bernardino, we think the decline would evolve regardless; the overall pattern evolution was in-play. Yesterday when noting Citi coming to recognize the 'realities' we've pointed-out for some time, by suggesting a 65% odds of a 'recession developing in 2016'; I pointed-out we've repeatedly contended that not only was the market on fumes but that 'recession' probably will be traced back to starting in July of this year; a time we thought the internals would peak (rebound) and markets start eroding, just as I began my July-August European journey.      

The point is today's argument that spending might contract because of terror is generally a 'cover' for excessive pundit optimism, or managers defending their overly bullish posture; whereas revenue and earnings prospects were already on the wane; so sure, these barbarian interlopers do inhibit mass gatherings a bit; perhaps some shopping patterns; but the trends were already in-place. So, while there is a multiplier-effect from frequent assaults, and it's seems brave to contend everyone will be as active and travel as often; the reality is a bit more timidity, or at-least situational awareness, on outings. It is amazing that citizens spirits recover quickly from attacks; but there already is more political fallout. It is incredible that some media persist in calling this a 'mix' of workplace violence (it's not; appears more a target of convenience and maybe some antipathy, but not an act of impulsive rage, as this was clearly prepared and planned). Also so hard to understand why media keeps trying to be 'politically correct', when that seems to be of less importance, than grasping facts regardless how they fall. 

We're all in-favor of people being cautious while living their lives as they wish of course; while realizing the frequency of these matters is very sobering. What is not pleasing is a (some believe intentional) mitigating of the focus on segments out there who are a threat to National Security, here or in European countries. I think it's a disservice to mince words, by not saying 'extreme Islamist' or Islamic terror; as that's exactly what generally prevails among the vast majority of wild attacks. Of course the majority of Muslims aren't involved; but generally serious levels of Saudi-sponsored Wahhabi 'cult' indoctrinated Muslims (via Madrasas paid for by the Saudi's to brainwash youth to hate everyone else) are evident in so many parts of the world, that politicians should aim precisely at that element. I say that because some politicians intentionally may want this to be vague, as it in fact inhibits intelligence and investigators focusing on differentiating 'good' versus 'bad' Muslims. Seriously; those very Washington leaders who insist on 'Islam as peace', should realize failing to call a spade a shovel in this horror, is actually sustaining the confusion, and damaging the image of decent Muslims; who 'mostly' disavow Wahhabi teachings, which are absolutely cult-like dictum.

In-sum: the Bull market ended basically half a year ago. A recession generally will likely be tracked to have begun in July, as I've contended most likely within many industries (auto sales only masked parts; shipping and other indicators of course telegraphing deterioration most of the year).  Political correctness is gradually giving-way to candor regarding perpetrators of terror; while politicians trying to spin things mildly do themselves and citizens a disservice, because it slows or negates addressing the challenge. Example; by still ignoring the core ideological enemy (Wahhabi Islam) for so long; tentacles have begun to spread it into groups (or youth) that can be radicalized separate from those indoctrinated in 'old-school' Saudi-sponsored mosques. Time, while so many contend there's nothing to do, allowed this to fester and become more of a threat. The problem and threat is worse in the UK and Europe; bad enough here. And yes, it has an overriding market and consumer psychology effect that goes beyond the economic slowing we were seeing unfold anyway. Finally, hearing Chair Yellen remark that even 100,000 new non-farm jobs will be a good number, is of course ridiculous; but reinforces my contention that the move to normalize rates is something they really want to do, almost regardless of 'real' economic conditions. That widely-presumed move would not even be a consideration if rates were snugged-up a bit say starting at least a year ago. As it is there is danger that the Fed will make the right move at the wrong time now but will move. Either way equities remain too extended, and price levels fading through support-resistance levels (as outlined in the main video yesterday and today) sustain our projection of how this would evolve.

Bottom-line: we chose not to withdraw any of our short-sale guideline position from December S&P / E-mini 2100; and simply have a 2080 fixed mental stop in-place at the moment. We suspect more liquidation in the morning before yet another attempt to bounce; which likely will be unsustainable.               

(Running late; the final tonight is the pre-close; which basically covers most market points, including a look at the Daily S&P chart in addition to intraday.) 

Daily action - reactions may be tempered a bit; but trends are evolving that are quite likely to remain in place overall. That includes FX markets, and US stocks too. And economic trends that predate the spate of recent terror concerns. The data we've gotten proves 'negative territory' (like ISM Services) for overall economics; a day like this with the Dollar consolidating (we've warned that was again likely given the crowded trade over 100) and Euro rebounding; or for the Oil market rallying (which was more the Dollar than OPEC positioning). Sure, ECB gave them less than markets wanted; but that also gave cover to our Fed Chair's posture, which is now less diametrically opposed to that of the ECB. 

Of course Chair Yellen, plus many on Wall Street, are increasingly falling-back on 'terrorism' as weighing against near-term consumer sentiment or spending. That's why I've pointed-out that economic deterioration predates such stances. It indeed can contribute to further retrenchment; but much depends on whether or not our leadership will identify the nature of 'cult' Islamic terror teachings, as distinguished from 'normal' Islam. Perhaps one reason they don't is because it might further empower supporters of the Shiite position; but not all Sunni's are extremists; though most extremists are indeed a subset of Sunni's (Wahhabi). It might assist intelligence and law enforcement if leaders would point this out. In fact not doing so probably enhances radicalization from other groups. And as a smattering of Muslims seem to 'not understand' where this comes from; they'd be well served if there was an effort to differentiate evil from traditional Islam.

What just happened in California seems to be a Saudi/Pakistan connection; as well as a possible link to Utah and Southern California 'Islamist sympathizers'. I realize that not all 'fundamentalist' Muslims are extremists; but being Islamist or fundamentalist increases one's vulnerability to being radicalized, at minimum. It is for that reason alone Islam dearly needs its version of a 'reformation'. Bulls on Wall Street are in the midst of a 'reformation' themselves; many know it but won't talk openly about it, as I've contended much of this year. Distribution I spotted or projected in each rally took place; and now after-the-face we know it from statements of fund managers who were existing certain stocks, groups or ETF's, including 'emerging (submeging) market' stocks. Similarly, insiders were often actively engaged in insider-selling 'on the backs' of corporate buybacks. 

For out part at the moment; we've rightly suggested investors respond to pleas for early December buying by saying: 'include me out' (a term Samuel Goldwyn uttered decades ago); as it was time to sell rallies, not buy for further advance. The Jobs number in the morning will probably amplify our view on this. Now, as is often the case, after selling and margin liquidations; a rebound is probable.  

For traders this is becoming a superb week again; enormous 50 handle gain on our doing Wednesday exactly what I wrote Tuesday night we would if there was mediocre follow-through to Tuesday's rally that I viewed as a one-day wonder: we got short Dec. S&P / E-mini at the 2100 level. We're still there Thursday; retaining overnight into early Friday. For traders we'll reevaluate as needed.