Deleveraging issues - stemming primarily from extended crypto insanity; had a spillover effect on equities that we discussed over the last few weeks... and as it unwound we got to a sort of (perhaps preliminary) capitulation Friday.

This was not about 'new-era' stocks; not even about Nvidia profit-taking; and very broad. Most of the destruction was done from the leveraging unwinding, and some residual of that probably will be sorted-out in the days ahead.

Now we go into a holiday trading week with 3.5 days of open markets, and it may well be that this recent chaos contributes to setting-up a meaningful time for accumulation where one believes appropriate, as distribution of tax-selling collided with the evacuation from Bitcoin and crypto in general, which made a toxic brew that contributed to simultaneous near-panic recent pressures.

On top of the Bitcoin / crypto de-leveraging (whether voluntary or compelled, as a lot of funds and so-called 'whales' are said to be reducing proportions of crypto being held; reversing their trend of preceding months and probably a thorn to those politicians and their families who have been heavy in crypto).

Beyond all that there was a liquidity concern triggered by the non-reported meeting of the NY Fed (days before Williams talked of another rate cut by the Washington Fed FOMC), which I thought related to the crypto carnage and a too-big liquidity challenge for major banks that recklessly embraced that area.

I have called rallies and declines in Bitcoin for years; but never trusted or did any trades, because it's unregulated, generally a global money-laundering or spurious kind of vehicle; plus I think Quantum Computers will crack the code (encryption) within a couple years; then you can argue if there's value at all.

Market X-ray: given the interlopers of normal seasonal patterns; like crypto / Bitcoin deleveraging; it's impossible to have total 'conviction' that Friday was 'the' looked-for downside 'capitulation', but it certainly was 'a' capitulation. What happens next depends on the foolhardy crowd in crypto licking their wounds and emerging (or submerging, depending how leveraged they were).

But the 'cross-asset' impact should be mitigated soon, if not already. If indeed it turned-into a full-blown crash; it would be the crypto-crash, which sure could always again happen since we'd envisioned Quantum cracking the encryption codes eventually (anyway). So it makes little sense for people (including big bankers & politicians) to embrace vehicles that are not really legitimate asset classes (perhaps my opinion; some others concur) and are used by nefarious types (like drug cartels o Asian gangs) to launder / move money cross-border.

I wouldn't emphasize an area that I do not invest in (or think others should too) if not for the impact it's had on everything in recent weeks. I saw 'correlation' a few weeks ago; but it took time to see that there was 'causation' from Bitcoin / crypto plunging; and while the two are not assumed, they rhymed for awhile.

Decent turnaround for an Expiration Friday; continuity may depend on stability in what we normally don't care about, which is crypto / Bitcoin compelled deleveraging (cross-asset selling I've noted for several weeks now). If that's not a problem perhaps we get a rough start but work higher toward the first of the seasonal holiday weekends. Cheers!

Perhaps there is more shuffling ahead (probably some; at least testing of lows if not more); but we've had a sharp sobering that triggered panic or confusion, because so many didn't make the 'correlation / causation' linkage sooner. In a sense we now hope that assessment is valid, because it may be that typically normal seasonal patterns that exhaust selling around this time, come forward.

So ideally we not only get a respite in equity pressure (related or not) to big crypto / Bitcoin liquidations; although maybe there too; 'now' that belatedly you have everyone recognizing the source of not just private credit challenges but related crypto unwinding. I'm not going to dig into it; but glad we detected the Bitcoin decline and were curious about the NY Fed and/or private credit.

To be clear I have no idea how deep this multi-week decline we recognized, in terms of panic cross/asset liquidation will go or who might still default (hard to know which 'funds', ETF's or even companies, hold how much and of what) as there are ongoing liquidity concerns, and that may be what a Fed meeting with bankers was about, in addition to private credit concerns; a related risk. While I don't know I would be pleased if the pressure came off all of it for now.

Bottom line: washout and Friday turnaround on a monthly Expiration too; not easy to engineer; but got it. Nevertheless the net for the week was lower; but that's irrelevant compared to getting the turn. Now what we need is recovery 'continuation' into the abbreviated trading week as often occurs in days going into Thanksgiving; but of course this is as much of a bifurcated market as we can recall; so nothing is carved in stone about this market.

And I'm very pleased that the small-cap dominated Russell was a comeback kid on Friday; as of course it lagged the big-caps which had to turn first to be 'point' on the attack higher. Thus it was all reasonably typical and there was no reason for neurotic actions or panic, though we do understand how some traders are very sensitive to technical levels being broken and so on; as that often associates with running stops sometimes just before you get a move in the other direction; in this case higher.

I know it's tough, especially for those over-trading and reacting to every little swing (typically they are swing traders with less conviction about fundamental prospects of a ticker or group), although in theory they could be right being on the negative side 'after' a sell-off; though usually incorrect when it's a broader brushstroke decline, such as this latest phase was.

Also because we realize; having said for months that mega-caps are absurdly expensive, that it's not at all always easy to get a recovery going, and only the future will reveal whether this Friday turn (trimmed a bit by weekend squaring as well as monthly Expiration) is merely a rally in a downtrend or beginning of classic late-year recovery behavior, which we'd sure prefer that is evolve into.

Enjoy the weekend, and be safe if traveling early for the holiday.

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