The 'trading range' bought time with Friday's recovery so it can stay relevant ahead of the debate. However, this market relates more to the perception that the 'powers that be' can sustain strength regardless into the election and deflect every shakeout effort that comes along. 

We'd say don't count on that persisting. And don't count on nothing but the Fed perhaps avoiding rocking the boat via rate moves in November being the only influence on the market's stability.  

Basically the market is looking at the central banks, politics, and mostly everything but corporate fundamentals and relativity to profitability. 

Oil and Dollar behavior matter too. Short-term it is particularly sensitive to both politics (obviously) and also the technical erosion that puts S&P on the brink of sliding notably under a prominent long-term trend line. A penetration of that could trigger algorithmic sell signals and such after the fact post-distribution indications that often prevail. 

Bottom line 

The market is slightly below an indecision or inflection point, as the Bulls staunchly keep reviving down markets; and presumably won't surrender until the 'trap door' under a beleaguered market is sprung. We are borderline at such a time.

Hence there are lots of 'swans', black or otherwise, flocking around the central-bank facilitated and valuation-extended market; which doesn't require any impetus to decline; other than a 'keyhole-exit' moment that has occurred during this same context; to wit: June and January as the best recent examples. One such purge could unfold any time. 

We have faded (shorted) rallies; not weakness; and it's exhausting but for traders profitable, as we tend to harvest some gains and retain the rest respecting our view that the bottom could fall out more vigorously at any time now. For investors, it's insane to chase these markets and most do not. That's why rallies are not sustainable. 

We're short Dec. S&P (in-part or in-whole as described) from 2167 at this time, after harvesting good gains from a prior 2180 area short. I'm well aware that this week added to those gains. I'm  not being greedy by staying with the short-sale, just recognizing the inflection prospects of a significant further decline, whether they bounce it first or not. 

Daily action initially responded shakily to both the British Pounding we reported Thursday night (as Tokyo opened). This to no surprise came back to a large degree, evidencing it as some sort of fluke since foreign currency markets don't usually work that way when Europe and the US are closed overnight. Hence the 'fat finger' idea. Nevertheless we have called for weakness for the Pound since 1.50 or so and the Euro 1.40; going back about 3 years; along with consistent overall strength. 
 

Most of the declines in the UK or Europe are done as modest moves should persist, given that the U.S. Dollar's relative strength should also persist. This matters mostly for macro implications as the investment spot was years ago when noted, although traders should expect trend continuation as we've outlined, in a more nominal way.  

 

Technically, trend defense is what's going on in the S&P; as markets are working-out of the long-term rising trendline we've often shown but without any definitive move. It's the same story of shorting weakness I so vehemently suggest avoiding and then those shorts get run-in. 

The inability to see follow-on sustainable strength suggests the Bulls are incapable of levitating this market much further whether one contends it is all manipulated by politics and central bankers or not. Investors are not inclined to come into this market because they see the risk matrix rising; and don't buy the inevitable rationalizations permabulls present.

For now we retain last Friday's December S&P short-sale guideline at the 2167 level (generally in-part as too many spots to take a solid 10 or even 20 point or handle gain). 

Projecting Monday's 'start at least, is a coin-toss as there probably will be reactions to the presidential debate. Even though we believe market downside risks are there in any event, that should follow on. 

To wit: regardless of who wins, we can still have a market contraction and/or 'recession', as new proposals come forth pre-vote or regardless who is actually elected. Hillary doesn't entirely embrace the trade approach Obama has; and even Bill recently trashed Obamacare; so you know that things are going to be 'refreshed so to say' either way.  

We've expressed our concerns. Jobs numbers didn't suggest anything other than a continuity of the sloppy economy and market behavior is as we've discussed. So we're holding short Dec. S&P 2167 and will see if they can bounce things enough to take us out (doubtful) or after some horsing around simply probe the downside very soon.  

The Fed had the market's back for years basically. And now it's pained as it knows policy snugging can no longer thread-the-needle (as was Bernanke's successful goal aside leaving the Fed painted in a corner with the Country's debt unmanageable if not the world's worst relative to GDP). Hence, this suggests the Fed, as gently as possible, is putting investors (especially in credit areas) 'on the rack' instead of having their back.

Without being too harsh, let me try to summarize what this means, without belaboring the usual 'will they hike', or 'does it matter even if they do just a little': lower interest rates have equated to bigger bubbles in the global quest for yield; and particularly the pressure on pension funds.
 

Weekend (final) MarketCast

2 o'clock balloon (intraday) MarketCast