Risks of the Covid cycle resurgence,  combined with economic constraints that delay a 'reflation', were key factors driving expectations of a (big tech-led) market shakeout, led by the very super-cap stocks that prolonged the 'illusion' of S&P strength for weeks if not somewhat for months (the broad internal high being mid-year). Now we shift to a move complex backdrop.

With domestic politics intruding, it's been misconstrued as the market driver to a degree; and the degree relates to the absence of fiscal Stimulus which may well have bolstered confidence better through these recent weeks. Absent all efforts succeeding on that front (Pelosi/Mnuchin sparring); there was nothing left to sustain optimism in the most overpriced sectors; even though they sure continue to do relatively well during a 'stay-home / digital' lifestyle.

Yes I saw it as discounted in the market beforehand and frequently noted risk was rising; in fact we were early with those stocks; but viewed most buyers as ridiculous chasers when the time to get in was our March 23rd (or so) low. For the majority, they topped in mid-summer, not early September with the S&P.

More than a dead-cat bounce but less than a full confirmation that selling or liquidation is out of the way - that's what we got Thursday and it set up the additional purge on Friday. We have not had a flat-out new liquidation wave.

Because big-caps gave an illusion of strength' to S&P and NDX/QQQ over a period of time; the broad market has busily exhausted internally to a degree. So what might be called a 'papier mache' market, masking FANG distribution, actually may helped set up low points (less risk anyway) in smaller stocks; but for now we won't know, as there are inserted political variables adding bias to which sectors and stocks seem 'favored' once we get through this anxiety.

So ... while we cannot divine whether a decisive victory by either side occurs (I am well aware there are contradictory polls, none of which assure anything of course; hence I don't spend time focusing on any of them; just mildly notice); we can say that this irregular chop persists and might even roil somewhat; as it fluctuates during what can become (or already is) what I submitted feasible a couple weeks ago: 'chaos theory'. Several such variables outlined below.

I'm less concerned about 'chaos' in the Election (though possible) and mostly as to whether civility prevails in the wake of an indecisive outcome. That's sort of why I prefer to see a clear outcome on Election Night rather than drawn-out for weeks; which is something that could evoke superficial emotional reaction, that hopefully no candidate would encourage during clerical vote 'sorting-out'.

What is clear (we made a correlation with stock market wave theories weeks ago) is none of these are assured (sort of the old historical interpretations by wave-theory types, that always looked good in hindsight but weren't nearly as useful for predictive purposes as they usually contended).

Executive Summary:

• The next phase on the downside resumed as anticipated Friday; with a down-up-down pattern for the S&P, led on the downside by overpriced super-caps stocks we've warned were too extended for a long time;

• The prospect of a 'lack of a clear winner on Election night' worries more than the market; but that's an overarching factor at the moment;

• An independent committee overseeing clinical trials of Regeneron's experimental COVID-19 drug told the company to pause enrollment of some hospitalized patients in one late-stage study;

• The committee found a 'potential safety signal or unfavorable risk/benefit profile' and recommended Regeneron stop recruiting patients who need high-flow oxygen or mechanical ventilation, pending data those enrolled;

• They continue early-stage exposure trials (which I'll explain a bit later);

• Sorrento was impacted by this story, even if not directly related (the hope of humanity rides more on antiviral therapeutics than vaccines for now; so low-doze MAB's, which is what Sorrento has, should not only facilitate the mass-production need, but also offer less toxicity along with efficacy);

• Notably ask: will Senators Ted Cruz and Tim Scott be lobbying both on behalf of Sorrento's work; and to open any FDA logjams (?); the are both affiliated with the firm Sorrento apparently retained in Washington.

• The stock market big-caps reflect angst and alternative visions of what of course either's dominance politically could mean for stocks;

• The new week will be one of the trickiest ever; and won't be resolved by a washout and turnaround; unless there's a clear-uncontested-outcome;

• In the background Covid remains the actual business challenge more so than how the vote goes; but we have to keep an eye on both for now;

• Not to paraphrase Churchill, but a 'viral curtain has descended upon Europe'; today the UK follows France, Spain, Germany and others.

The worst demand disruption for Oil and related products, is also a reflection of the pandemic. Of course the appetite to drill among exploration companies is lower; and ultimately that may support price levels over time.

Part of my expectations for decline (and hence regular focus on treatments as opposed to just Covid vaccines); relates to poor policy which listened to older establish people regarding the global pandemic; and less so modern science. Yes both focused on things like social 'guidelines'; but I don't refer to 'mask or no mask' debates; but rather the direction that funding took for far too long.

Anyway all this delay in Covid fighting contributes to lower consumer demand and activity and not just related to whatever a National or state politician says or does. For evidence I'll offer Florida; where this week Disney fired even the recalled performers (for the most part about 92% of all of them); since there's virtually no business, even though this State if pretty-much wide opened. So it to a degree doesn't matter if you're in a state that is stricter or more cavalier; or even what opinions exist about how a state or city handles matters.

People are concerned; some will mask that by pretending to be bold; but I'm assured enough of the concern to believe even the biggest deniers of Covid welcome efforts to get it under control; development a vaccine or therapeutic that's out-there if needed (they may say it will reassure people to go out and mingle and yes it will; but I personally know people who called it a hoax until it struck their family or friends... or themselves... suddenly not such a political manipulation). And I think most who thought this was somehow a domestic or political issue (the handling partially); learned that it's global except for islands like Taiwan, which managed it wisely all along. So did some in Europe; then it got to where they wanted more openness (Spain & Italy) and paid a price for doing so. If you still have a rampant pandemic, opening will result in closing of course; so that proved not to be a decent answer. Belgium right now has the world's highest rate of positivity and is stunned. That's also the seats of power for the European Union and NATO Headquarters incidentally. (I'll retain last night's chart of Europe's market; it never reflected FANG-type concentration.)

What is gleaned is too much focus on specific policies; not enough on 'cures' for this scourge on humanity. On top of it, we're not at a point of 'psychological empowerment' that a simple treatment 'if needed' would provide, though when it comes; life will roar back we project. I reemphasize that; and it's why a focus (stock participation or not) that I emphasize the urgency to fund treatments. It is notable that Europe and Asia have also focused on vaccines over MAB's; as it is changing. Remember there is also T-Cell boosting that might assist; so we have an eye on that possibility too. More next week on this topic too as we may well not have an indication of how the vote goes; though hope to (that's actually less significant than getting the pandemic corralled somehow).

Meanwhile . . . there are two developments worth nothing related to Covid-19 treatments. One relates to jitters about MAB therapy itself; that would be very bad news for society (given how important treatment is for acute Covid cases not the illusive eventual vaccine promises augmented by heavy funding).

Regeneron on Friday said it was suspending enrollment for its COVID-19 trial of antibody treatment (the product President Trump got) but solely among the sickest patients who require high-flow oxygen or are on ventilators. Some sort of safety issue came up; but apparently only in the very sickest patients.

Here's a quote from Regeneron's statement: "Based on a potential safety signal and an unfavorable risk/benefit profile at this time, the IDMC recommends further enrollment of patients requiring high-flow oxygen or mechanical ventilation be placed on hold pending collection and analysis of further data on patients already enrolled."

Regeneron continues to enroll hospitalized patients who either don't need oxygen or are on low-flow oxygen, and recommends the continuation of the outpatient trial.

This news hit all the stocks in the MAB 'space', including Sorrento, which has or plans trials of their more-concentrated (essentially lower-dose) MAB's in at lest 3 different forms for both hospitalized and outpatient environments.

While there are no additional details, scientists always believed that antibody treatments should work best when given early on in COVID-19. It's because they work by preventing the virus from invading human cells and replicating.

By the time a patient has progressed to late-stage COVID-19, the main factor driving illness is no longer the virus itself but abnormal immune responses like ARDS (respiratory distress) causing severe inflammation and organ damage.

Note Sorrento's CEO Dr. Ji regularly advocated early use; especially with the News Release just yesterday about intranasal (nose drop) prospects of use really at the very earliest sign of a problem; well before disease progression.

Along these lines; most experts believe Therapeutic Antibodies are very much a valid treatment approach; as the idea is to introduce appropriate antibodies to the body, rather than a vaccine approach to force the body to make them. It is known than Sorrento has a broader 'library' of antibodies; and Regenron it's speculated may have access to at least one; but that's hard to extrapolate out of available data or information. But again the daily issue was 'hospitalized' or advanced illness patients; not earlier.

Also Regeneron got at least $450 Million in Federal funding; which Sorrento getting none so far that we know of. Sorrento's excessive hype about a 'cure' early on probably soured the media (or even some in Washington) following them; because nothing ensued. Nothing failed; but follow-through was/is slow.

That may be about to change; both to Congress, the FDA and even for public awareness of these multiple tests and solutions they've been lining-up, but of course generating controversy or frustration due to no reported human data of course as Texas Golden Hamster testers seem to be doing extremely well.

Perhaps Sorrento intentionally slowed STI-1499's evaluation so as to focus a great deal more on it's more-advanced (powerful) siblings like STI-2020. We don't know but the emphasis seems to infer that. Also the hiring yesterday of a 'lobbyist' firm in Washington DC would seem to go along with awareness of a need to push for funding and/or approval; or that their ducks are lined-up so they think it's appropriate now (the way Dr. Ji talks; you'd think so months ago but o.k. maybe they figured out the need to get some awareness out there).

And guess who is associated with that firm and shown in the filed document as the registered lobbyists: Senator Ted Cruz and Senator Tim Scott. One or the other sit on the Senate Appropriations and Heath Committees incidentally; and Senator Mike Lee is also on one of the committees. So we'll say; but now I suspect (and this will be after Elections during the interim) we'll hear more of course not just from lobbyists, but the pending status or existing requests.

In-sum: so until we see if a 'Blue Wave' or 'Red Wave' crests, there's no real resolution to this expected correction activity . What we'd dread more would be only ripples, and no tsunami in either direction.

The unwinding of big-tech persists; irregularity will vary on how tough it looks like in the wake of the Election. The market rebalancing (value vs. so-called growth, which is code in the industry for inflated big-cap technology leaders) is going to point toward so-called value stocks next year regardless of who wins; but clearly sectors amidst such broad definitions will vary greatly.

There is also the firmer rate market (bear bond behavior) we've talked about a good number of times, because higher yields are great when business revives but when they persist if or as business eyes rising defaults; that's the inverse.

Companies are punished where they miss numbers; and some of that goes beyond excessive expectations, but shows the illquidity outside super-caps; it again illustrates why I thought many managers focused on those (they are not so much interested in fundamentals, but liquidity; so they're not trapped in a 'roach motel'; they get in; but also want the ability to get in; but also get out).

Bottom-line technically: only now do you hear technicians referencing the 'double top' in the S&P I allude to daiy, as well as the overall breakdown from the ascending wedge we've noted months ago.

Whether this evolved projected decline perseveres past any post-Election or similar reprieve (as dubious as that may be); there remains an overriding and unresolved issue; that like points to lower S&P levels regardless who wins (of course, again, even if we actually learn who wins).

That is Covid-19. The sobering realization that it's not only not defeated (sure wish every single person, politician, medical expert, or not, that kept calling it was no big deal had been right, but they were all wrong)... but roaring with the focus on vaccines rather than therapies; hence imperiling global economics.

(Late Saturday London time, PM Johnson cracked down.)

That's a key point of my saying it doesn't matter to the small businesses that normally rely on physical interaction with customers (or their staffs), whether the state they're domiciled in allows being open or restricted. People won't come, at least those who comprehend what this is; or if so it's reluctantly.

So a shot or pill treatment that's truly and rapidly effective would change the dynamic and allow being bullish a good bit more on society as a whole, not just certain stocks. We're not there yet; and the world needs it yesterday.