Desperate risks to chase yield  have been the hallmark of this year. Most investors, including those on fixed-incomes who normally tend to shun risk, had, to be blunt, become slaves to central bank policies denying decent returns without risk. That departure from the norm is increasingly coming home to roost now, as junk bond and similar activity show, with more problems looming. In the very short run, you get people shorting markets into weakness after the prospects become evident, almost announcing to the world that valuations at these levels are unsustainable. So of course the market will try for a 'relief rally', and that's what's afoot at the moment.

We discussed last week the prospects for getting some jockeying around and relief rallying, and that's what started on Monday. It changes nothing longer-term. Hence the prior realization of a call for rally possibilities (absence of offers) into year-end. That wasn't 'Santa Claus', but a conclusion to, and a brief reduction of, forced liquidation from last week's reversal and purge, with an absence of offers possible in some stocks as people try to hold them for sale in a new tax-year settlement date. It's iffy; it doesn't mean we don't dip anew anytime in the interim, but just gives a general outline of how it can go as the process evolves.

Tonight we're going to take time to focus on an incredibly in-depth article by Seymour Hersh. The long-time reporter for the New York Times and  the Washington Post has a fairly scathing tale about intelligence sharing, but at the core is perhaps the explanation for an unusual series of Washington changes in the military or intelligence hierarchy that have already been controversial. Seymour's work is almost dated, with the necessity of joining with Russia (and even China) to fight ISIS having matured since he apparently submitted his final drafts to be published; otherwise it makes for interesting reading if one wants to delve into it.

Special and unusual:  We've mentioned before, and even some media hinted at, the confusing often-dubious policy of the White House supporting old policy initiatives that seem to have evaporated. The primary one centered around the idea of arming 'moderate' rebels, as if they wouldn't turn around and sell arms to ISIS, or even defect to them. We've also questioned Turkey's policies, given a predilection towards Islamism by Erdogan. Furthermore, we often pondered, given Saudi Arabia's recent 'presumed' efforts to form a multinational Arab Sunni alliance against ISIS, whether it was proactive or in response to recognizing that their long-running subsidies to terrorists (directly or indirectly), plus exporting Wahhabi-based fundamentalist dogma, have backfired. In early January, a new book will be released discussing how the Pentagon got around the White House, after it would not 'listen to reality', and persisted with a policy line that didn't make sense; even if some media dutifully rehashed it. It's been suggested that Washington ignored the Central Command and summarily later retired Defense Intelligence Agency Chiefs (even the JCS Chairman), and frankly, this will clarify the situation in at least a few ways (very complex).

A preview was released today of a longer piece due on Jan. 7, written by Pulitzer Prize winner Hersh. While sources and methods about everything dealing with the Middle East are at best muddled, there's so much interesting in this lengthy article that relates to a leadership purported to be at loggerheads with the intelligence community and even our European allies; it's not a partisan read, even if it sounds like one. Actually it's scary, because the implications are that we assisted ISIS, with a cover of providing arms to the 'barely-existing' rebels, not meaning the Kurds. If even half the contentions Mr. Hersh makes are correct (including those which might question why Obama is so reticent, but increasingly compelled by events to embrace rather than chastise Russia and soon-to-be Chinese involvement), I think this has significance that goes beyond geopolitics. The Clinton campaign could be incidental damages should this be proven, because if it can be shown the US was indeed operating a covert transshipping operation for arms from Libya to ISIS (or so-called rebels) via Turkey, that then becomes quite a smoking gun. 

This just hit today, so I have no idea if the media is addressing it, but suspect in the days and weeks ahead they will. So we'll share with you the full article from the London Review of Books: Syrian War Intelligence Sharing.

Technically, the stock market simply bounced off another penetration of the S&P 2000 level (futures briefly penetrated), in behavior that is fairly typical after a downward Expiration; especially one that saw fairly vicious late selling. Fortunately we were flat before the late rally, taking two reasonably good intraday scalps for those so inclined; at the same time maintaining our overall guideline short from last week.

Daily action has recognized the changing financial landscape for months; all through the snugging-up of monetary policy 'intentions' and 'tapering', which of course preceded nudging-up the 'advertised' price of renting money. That's also the case with recognizing the deteriorating fundamentals or earnings guidance; a factor that should be kept in mind regardless of any current snap-back.

We're open-minded to a rebound from a lower low to a lower peak; a very small hint of that was provided today but mostly this session was a desperate effort, it seems, in a couple big caps (like Apple) to revive things late in the session. The two efforts (especially the first) worked well for scalpers interested in the downside while the official guideline short-sale in the wake the FOMC rate hike of late last week has been retained from the March S&P / E-mini 2055 level. For now we have simply lowered the fixed mental stop to 2020 to ensure now a minimum (and huge 35 handle possible gain for any portion retained until now). And, as we sometimes suggest, that would be for 'half' the position, not entire, as we could get an early thrust that goes nowhere, then fades.

This is a short trading week so that's part of what you likely saw late Monday as they ramp things up for an intraweek rally quicker; knowing that by Thursday most players will be square for the week. Markets close at 1 pm Christmas Eve (Thursday) and are closed Friday. Again, for now short March S&P from 2055 with a 2020 mental stop on half of  remaining positions will be the guideline.