Sentiment and positioning really haven't changed as much as reasonably did seem possible in the Expiration; although for sure the heavy preceding days rekindle debate as to whether demand will reappear next week (probably will try); since there's a bit of an equilibrium between 'supply & demand' after 12 days down basically. Overall correction is short and relatively shallow, so far.

If Hurricane Hilary (how appropriate) diverts her early 'track' and plows right into Southern California, it could be an historical financial event too; and have an impact on everything from Oil price, to (interestingly) Fed monetary policy. I send caution to friends in L.A., Palm Springs; Monterey; geez everywhere. I don't want to just focus on markets; but there are 7 refineries in Hillary's path. It will in any event break all rain records for the history of Southern California; and yet another reason to fear the uninsured.. Billions upon Billions... wow. I wonder what percentage of residents have 'flood insurance', hurricane as well as rising waters, and earthquakes coverage. Bracing for impact; truly big deal.

Now while we have anticipated the turbulent defensive markets of August, as well as probably beyond, we are open-minded to 'Hail Mary' rebound efforts; a couple of which showed up now and then; but typically succumb to what just a few days ago to the 'sell the rallies, rather than buy the dips' trader reversal in moods, given so many were negative all year (sort of right regarding average stocks, but not the averages, so impacted by the mirage of big-cap leadership giving more impression of strength). It's opaque and part of why I termed this an illusion in a broader way; since the crashed stocks are still mostly crashed; so it takes the mega-cap techs really to determine the ebb and flow of all this.

The big Asian buyers of U.S. Treasuries are contributing to U.S. Treasuries near 16 year highs; Japan in-particular getting more attractive yields at home; so that adds to selling here; and hence pushes our rates up. If there's any sort of major calamity (that has a habit of occurring between August and October), then everyone runs into U.S. paper; and that too keeps the attractiveness of a perceived safer environment as competition to stocks; to the extent major big caps (often cyclical dividend-payers) become temporarily less attractive. For sure that matters where taxable events get involved; so mostly retirement or pension portfolios, where taxes only accrue upon distribution; not every trade.

In sum: a rather poignant August Expiration contributed to the week's chaos, although S&P and NDX were anticipated to move to lower levels anyway. In a couple cases you have short-covering, impacts of the Options Expiration, and a favorable tone from 'nibblers' (reminds me of a former Beverly Hills favorite spot) but nothing that yet promises a 'full meal' or bloated equity prices again, at least for now. This is a process that's probably about midstream overall.

Volatility related to yields, to the set-aside prospects for Fed tightening; plus a generally minor nature to adjustments for forward guidance from late reporting companies. Meanwhile indicators (technically) are generally midstream, which is why many will now concur with me that for S&P, more correction is likely.

Atlanta GDP Now, versus the sentiment surveys, won't resolve the outcome. I suspect something will break enough to put a stop to the Fed; or a 'crash' not here, but in China, led by property developers that remain in big trouble there; not to minimize the threats to borderline commercial property holders here.

Sentiments won't reveal much in this market; everyone is frustrated and a bit introspective about this market relating to prior eras in American markets. For now part of the complexity to this goes beyond the Fed; beyond earnings for a key stock like Nvidia or any; beyond whether the 'War' grinds on in Ukraine; to beyond typical aspects of market analysis.... given it's an 'era of extremes'.

Thus we have to include 'weather', insurance challenges; flight capital (mostly from Asia) cramming into U.S. Treasuries; and normal seasonal weaknesses I have indicated for this time-frame months ahead of time (and also prospects it should be added, for gradual accumulation of big stocks only after 'el foldo' is likely evident; and for smaller specialty stocks on weakness if bold (gambling). All of that is in-anticipation of getting stocks at values (or disruptive prospects) which make them appear to be at least less risky looking forward to 2024.

Bottom line: several of the leading mega-tech stocks got so expensive that it's arguable they priced-in the entire prospects of the next couple years before a correction began; hence everyone is watching (or keying-off-of) such stocks.

So is the NDX of course; and due to capitalization impact of such stocks, the S&P as well. As to Nvidia; rally or not on results; it probably goes down over the weeks (even months) thereafter.  Kidding (maybe) aside, this is a remarkable time, as we're reminded how unusual things are, basically everywhere.

Unusual to say the least; after residing in Los Angeles for 26 years before I'd gradually shifted to the East Coast (due to market opening hours and flying so frequently between New York and Florida in those days) ... I never thought in the heart of hurricane season (now) I'd be concerned for my California friends that used to kid me about earthquakes and fires, vs. hurricane risks. Well, for sure I hope it turns West before grazing SoCal, but unlike earthquakes, we at least know well in-advance when a big storm approaches. Now you know that feeling, and by the way if that happens here in Florida in weeks ahead, I suspect you'll find me flying away, which after 3 years (a record for me) not on a single flight (due to the health issues I got through); I'll plan to fly again.

For now I'd say the greater risk to the Southwest is flooding; a year's worth of rain all at once. Maybe Lake Mead will finally get filled. For markets, pressure on margins is a concern... oddly when things break; people reduce spending; risk of financial accident (Evergrande in China might indirectly be systemic; to be determined); Powell misspeaks (Jackson Hole coming up); and so on. And of course 'Government Shutdown' risk; the UAW Strike, and well... more work.

P.S. August 'heavy' Expiration done. The market's shakeout will try to resume and remains a time of funky trading; so it's hard not to suspect some of the mega bit-caps have more work to do in the projected mid-July into August-September corrective/defensive phases.

Meanwhile, batten down the hatches in the Southwest, imagine Las Vegas flooded (I have seen that in my life twice); and have a backup plan not just for stocks, but if you have a major mess (such as hillside mudslides or the like). I envision the Gulf coast will soon get a big storm; Oil will rebound, and likely at least one or two 'Cats' (hopefully not 4's or 5's) will visit Florida in September.

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Market Briefing For Thursday, Aug. 17
Market Briefing For Wednesday, Aug. 16
Market Briefing For Tuesday, Aug. 15